Is a lender environmentally liable for the simple act of lending money?

Abstract

PurposeThe purpose of this paper is to demonstrate whether or not lenders are environmentally liable by the simple act of lending money. The concept of “lender liability” is one of the more critical issues which seems to be ready to upset the “apple cart” of environmental calm, which the English law enjoyed until recently. Why should banks be held liable for pollution and clean-up costs? The banks’ responsibility should end when it has granted the loan to the borrower to carry out its commercial activities. It is argued that a lender who becomes involved in the borrower’s financial management is unlikely to incur a clean-up liability, but it will become liable to clean it up if it forecloses or takes possession of the land. Can the bank be regarded as the “owner” of the land? In some English statutes, there is no definition of the word “owner”. Does a mortgagee in possession entitle him to ownership of the property to hold him responsible for liabilities for environmental harm?Design/methodology/approachThe development of domestic environmental liability and the Trans-Atlantic position with the USA will be examined. The “owner” concept will also be critically reviewed to see whether banks and mortgagees can be regarded as owners on possession of the property. The dilemma of the English courts with regards to lender issues and lender self-protection will also be examined. This will all be analysed and criticised in this paper.FindingsThis paper aims to demonstrate whether or not lenders are environmentally liable by the simple act of lending money. It will also discuss “owner” concept to see whether banks and mortgagees can be regarded as owners on possession of the property.Originality/valueIn this paper, the “owner” concept will be critically reviewed to see whether banks and mortgagees can be regarded as owners on possession of the property. The dilemma of the English courts with regards to lender issues and lender self-protection will also be critically analysed and compared with different legal systems.