Statement of risks and pollution: the information on which the validity of the price depends

The institutional buyer who signs a preliminary sale agreement (promesse de vente) on an office or commercial asset or an income-producing building rarely treats the statement of risks and pollution (état des risques et pollutions, "ERP") as anything other than an annexed document. Yet this document, most often completed by the seller himself, determines two things: the accuracy of the information on which the price was set, and the opening of a statutory option between rescission of the sale and a reduction of the price. Between an unreported technological risk prevention plan, an omitted soil information sector and a former classified installation whose history was not disclosed, the legal bases are neither the same, nor subject to the same time limits, nor accompanied by the same remedies. This guide deals with the ERP from the buyer's point of view: what the document actually covers, what an absent or inaccurate ERP is worth, how the regimes of Article L. 125-5, Article L. 125-7 and Article L. 514-20 of the French Environmental Code fit together, and how these actions combine with a negotiated environmental liability warranty.

What the statement of risks and pollution covers, and what it does not cover

A regulatory scope widened since 2023

The information given to buyers and tenants on risks rests on Articles L. 125-5 to L. 125-7 and R. 125-23 to R. 125-27 of the French Environmental Code. Decree No. 2022-1289 of 1 October 2022, made pursuant to Article 236 of Law No. 2021-1104 of 22 August 2021 known as the Climate and Resilience Law, recast the system with effect from 1 January 2023, and the order of 27 October 2022 sets the form template.

Depending on the situation of the building, the document must state:

• exposure to a natural (PPRN), mining (PPRM) or technological (PPRT) risk prevention plan, whether prescribed or approved, and the works required by the rules of the plan;
• the seismicity zone (levels 2 to 5) and the level 3 radon potential zone;
• location within a soil information sector (secteur d'information sur les sols, "SIS") within the meaning of Article L. 125-6;
• exposure to coastal erosion for municipalities on the list set by decree;
• inclusion within the perimeter of an aerodrome noise exposure plan;
• losses that gave rise to compensation under the cover for the effects of natural or technological disasters, during the period in which the seller owned the property.

The document is valid for six months. An ERP prepared when an asset is put on the market, where negotiations extend over a half-year, will therefore have to be updated before completion of the sale by notarised deed (réitération).

A declaratory document, not a certified diagnostic

This is the point that buyers underestimate most. The statement of risks and pollution is indeed part of the technical diagnostic file under Article L. 271-4 of the French Construction and Housing Code, but it is not subject to the same regime as asbestos, lead or the energy performance diagnostic. No certification is required of the person who prepares it. The seller, his agent or an unaccredited service provider may complete it on the basis of prefectoral orders and the Géorisques portal. In practice, the ERP sale diagnostic is an administrative transcription, not a field investigation.

Two operational consequences follow. First, a compliant ERP is not a certificate that there is no pollution: it lists regulatory zonings, not the physical condition of the soil. Second, the liability of an external service provider is, in many cases, harder to engage than that of the seller, precisely because the property ERP stems from a personal obligation of the seller and not from a regulated service. The institutional buyer therefore cannot treat the ERP as a guarantee; it must treat it as an entry point to its own due diligence.

The timetable of disclosure: advertisement, viewing, preliminary agreement, deed

Since 1 January 2023, the disclosure obligation operates in three stages, which multiplies the breaches that may be relied on.

The property advertisement, whatever the medium, must state that information on risks is available on the Géorisques website, with the address of the portal. At the first viewing, if there is one, the statement of risks must be handed to the prospective buyer. The statement must then be annexed to the preliminary sale agreement or, where there is none, to the notarised deed, and updated if its date of preparation is more than six months old.

For a professional buyer, this chronology has direct evidential value. An ERP annexed to the notarised deed but never produced at the preliminary agreement stage means that the price offer was made without the statutory information. This sequence, documented by data room exchanges and covering emails, forms the factual backbone of an action for a price reduction.

Failure to inform the buyer: the statutory option under Article L. 125-5

An option, not an automatic sanction

The French Environmental Code attaches to the breach a civil sanction of its own, independent of ordinary law:

Where the provisions of this article are not complied with, the buyer or the tenant may seek rescission of the contract or ask the court for a reduction of the price. (Article L. 125-5 of the French Environmental Code)

Three features shape the strategy. The sanction covers the total absence of an ERP as well as its inaccuracy or incompleteness: a statement that omits an approved PPRT or a compensated loss is, legally, a failure to inform the buyer. It opens an option, not a cumulation: the buyer chooses between undoing the sale and obtaining a reduction. Finally, it does not expressly make the action conditional on proof of a quantified loss, but a price reduction in practice assumes that the court has material with which to assess the loss in value.

This last point deserves attention. Courts assess the breach by reference to its effect on consent and on value. A purely formal defect, relating to a zoning with no consequence for the usability or insurability of the asset, rarely results in a substantial reduction. Conversely, the omission of a PPRT requiring strengthening works to the building, or of a classification in a coastal erosion zone that impairs future buildability, directly affects market value and the yield trajectory.

Rescission or price reduction: an economic trade-off

The option is not neutral for an investor. Rescission puts the parties back in their prior position: return of the price against return of the property, with the usual difficulties of the occupation indemnity, the fate of acquisition costs, works carried out and the financing put in place. For an asset that forms part of a portfolio, has been refinanced or even partly re-let, rescission is often economically inappropriate, even where it is legally available.

A price reduction, for its part, consolidates the acquisition and transfers the cost of the risk to the seller. It does, however, require the loss in value to be quantified, which in practice leads to seeking an expert appraisal. The summary proceedings for an expert appointment (référé-expertise) under Article 145 of the French Code of Civil Procedure remain the natural starting tool: they make it possible to have the actual condition of the property, the effect of the omitted zoning and, where relevant, the existence of pollution recorded, before the amount is set and proceedings on the merits are brought. For an institutional buyer, a court-appointed expert report has a second advantage: it ends the debate on the burden of proof and compels the seller, his notary and the service provider to explain themselves in adversarial proceedings. The conditions of admissibility of this measure, including the legitimate reason, and the framing of the expert's brief are dealt with separately in our article on summary proceedings for an expert appointment before a property dispute.

The trade-off therefore comes down to one question: does the asset remain consistent with the investment thesis once the risk has been revealed? If so, a price reduction is the rational route. If the zoning or the pollution rules out the intended use, rescission again becomes the reference option, and it is best combined with an alternative claim for a reduction.

Polluted soil: two special regimes more favourable than the ERP

The statement of risks records whether the property lies in a soil information sector, but it says nothing about the actual condition of the soil. Buyers of industrial or logistics assets, or of land being redeveloped, have two specific regimes available, more powerful than the option under Article L. 125-5 alone.

The soil information sector (Article L. 125-7)

SIS, created by Law No. 2014-366 of 24 March 2014 known as the ALUR Law, list the land where knowledge of pollution justifies soil studies and management measures in the event of a change of use. They are determined by the prefect and can be consulted on Géorisques.

The seller of land located in a SIS must inform the buyer in writing and provide the information made public by the State. Failing that, and if pollution making the land unfit for the purpose specified in the contract comes to light within two years of discovery, the buyer may seek rescission of the contract, obtain repayment of part of the price, or seek remediation of the site at the seller's expense where the cost of that remediation is not disproportionate to the sale price.

Two lessons for structuring follow. First: the purpose must be "specified in the contract". A deed that is silent on the intended use deprives the buyer of the unfitness criterion. A buyer who purchases a former industrial site in order to develop housing or an office scheme therefore has an interest in having that purpose stated in the deed, and not only in the investment memorandum. Second: classification in a SIS triggers, where a construction project is planned, the obligation to produce a certificate issued by a consultancy certified in the field of polluted sites and soils, confirming that the management measures have been taken into account in the design of the project. The cost of these studies should be budgeted at the offer stage, not discovered when the planning application is filed.

Land of a former classified installation (Article L. 514-20)

The most formidable regime for a seller is that of Article L. 514-20 of the French Environmental Code, which applies to land on which a classified installation subject to authorisation or registration has been operated. The seller who is aware of this must inform the buyer in writing and state, to the extent he knows them, the significant dangers or drawbacks resulting from the operation. Failing that, and if pollution making the land unfit for its purpose comes to light, the buyer has, within two years from the discovery of the pollution, the choice between rescission of the sale, repayment of part of the price, and remediation of the site at the seller's expense where the cost does not appear disproportionate to the sale price.

This provision calls for several technical points. The obligation falls on any seller who is aware, whether or not he was the operator. The starting point of the two-year period is the discovery of the pollution, not the sale, which opens a window for action well after completion. Remediation at the seller's expense is a remedy in kind that the option under Article L. 125-5 does not offer: for an asset being redeveloped, it is often the only useful remedy, since a price reduction does not necessarily fund the clean-up required by the authorities.

To these civil regimes is added the administrative regulation of classified installations. The obligation to restore the site falls on the last operator, and the reform introduced by Law No. 2020-1525 of 7 December 2020 known as the ASAP Law, clarified by Decree No. 2021-1096 of 19 August 2021, requires certificates issued by a certified firm at the various stages of cessation of activity. The mechanism of the third-party applicant (tiers demandeur), provided for in Article L. 512-21 of the French Environmental Code, also allows a developer to take the place of the operator for remediation, subject to the provision of financial guarantees. A buyer who takes over industrial land without checking how far the cessation of activity procedure has progressed is buying an administrative uncertainty that neither the ERP nor a no-warranty clause neutralises.

Ordinary-law bases available in addition

The option under Article L. 125-5 does not exhaust the buyer's means. Three civil law bases usefully overlap.

The pre-contractual duty of disclosure under Article 1112-1 of the French Civil Code requires a party who knows information that is decisive for the other's consent to communicate it to that party. The text provides that the parties may neither limit nor exclude this duty, which deprives of effect the clauses of the preliminary agreement by which the buyer declares that it has received all relevant information. The breach engages the seller's liability and may lead to annulment of the contract under the conditions applicable to defects of consent.

Fraud (dol) under Article 1137 of the French Civil Code covers the intentional concealment of decisive information. It is the relevant basis where the seller held an environmental audit report, a prefectoral formal notice or an operating history that he did not place in the data room. Its practical interest is twofold: the limitation period for the action for nullity runs from the day the fraud is discovered, and fraud defeats clauses excluding warranty.

The warranty against latent defects (vices cachés) under Articles 1641 et seq. of the French Civil Code finally allows an action for a price reduction or for rescission, within the two-year period of Article 1648 running from the discovery of the defect. Two limits must be kept in mind: exclusion clauses are common in deeds between professionals, and it is accepted that a seller who knew of the defect, like a professional seller of the building, cannot rely on them. For an institutional buyer faced with pollution, the most effective combination generally consists of basing the main claim on the special environmental provisions, which withstand boilerplate clauses, and relying on fraud in the alternative where the seller's knowledge is documented. The scope of the clause excluding the latent defects warranty and the means of overcoming it by proving the seller's bad faith are examined in our article devoted to that clause.

Interaction with the environmental liability warranty

Asset deal: the environmental warranty clause

In an asset acquisition, negotiation almost always concerns a clause excluding any warranty as to the condition of the soil and subsoil, accompanied by a declaration by the seller that no pollution is known. This architecture is misleading: the no-warranty clause neutralises the latent defects warranty, but it cannot defeat the regimes of Articles L. 125-7 and L. 514-20, which are matters of public policy, nor fraud.

The prudent buyer therefore negotiates less the exclusion than the organisation of the remedy. The decisive negotiation points are the definition of the triggering event, which must cover any pollution prior to the transfer of ownership irrespective of its date of discovery, the duration of the warranty, which must be aligned with the holding horizon and the works timetable, the cap, which must be tied to the estimated clean-up cost and not to a contractual percentage of the price, and above all the security attached: escrow of part of the price with the notary, autonomous first-demand guarantee, or bank guarantee. A liability warranty that is unsecured, given by a selling company emptied of its substance after the price has been distributed, has no recovery value. On the contractual allocation of the clean-up cost and the third-party applicant mechanism, see our analysis of the environmental liability warranty in the acquisition of a property asset.

Share deal: the liability warranty and indirect risk

Where the asset is held in a company, the buyer takes on the environmental liability by consequence, without benefiting from the actions under Articles L. 125-5 and L. 514-20, which presuppose a sale of real property. Protection then rests exclusively on the asset and liability warranty agreement, on the environmental representations and warranties, and on the prior audit. The gap in protection between an asset deal and a share deal is significant, and it must be reflected in the price or in the scale of the security required.

Insurance and transfer of risk

Environmental liability policies and historic pollution cover form a third tier, useful where the scale of the risk is known but cannot be quantified, or where the seller refuses to extend the duration of its warranty. They do not remove the need for an audit: an insurer will price a documented risk, not an unknown one.

Turning the ERP into the entry point to an audit

For an institutional buyer, reading the statement of risks and pollution should trigger a sequence of checks, not close the subject.

• Check the ERP against public databases: Géorisques for zonings, SIS and classified installations, and the mapping of former industrial and service activity sites for the history of use of the plot.
• Ask the seller for the complete operating history, prefectoral orders, cessation of activity reports and prior environmental audits, and have negative answers recorded in the data room.
• Commission a phase 1 environmental audit, documentary and historical, systematically for land used for business activity, then a phase 2 with soil investigations where phase 1 reveals a sensitive use.
• State in the deed the intended purpose of the asset, a condition for the application of the special regimes.
• Tie the condition precedent and the escrow to the result of the investigations rather than to a declaration by the seller.

This sequence has a cost, but it compares with the price of the reduction that the buyer will then have to obtain before a court, with an evidential risk and a delay of several years.

Key points

The statement of risks and pollution is not a compliance document to be annexed; it is the vehicle of a statutory obligation, breach of which opens to the buyer an option between rescission and a price reduction. But it is also, for an investor, a weak document: uncertified, purely declaratory, silent on the physical condition of the soil. The institutional buyer's real protection does not come from the ERP; it comes from the special regimes of Articles L. 125-7 and L. 514-20 of the French Environmental Code, which are of public policy and withstand boilerplate clauses, and from an environmental liability warranty that is properly capped, time-limited and secured by an enforceable security.

Our position is clear: on an industrial, logistics or redevelopment asset, negotiation of the environmental clause must precede the setting of the price, not follow it. Before any firm offer, have the ERP cross-checked against the operating history of the plot, have the intended purpose written into the preliminary contract, and make payment of the last instalment of the price conditional on documented clearance of the soil risk. If the risk comes to light after the sale, the reflex is the summary proceedings for an expert appointment under Article 145 of the French Code of Civil Procedure before any settlement discussion: the measure fixes the condition of the asset, and it sets the balance of power on the amount.

Frequently asked questions

Does an annexed but inaccurate ERP allow the same action as an absent ERP? Yes. Article L. 125-5 of the French Environmental Code sanctions failure to comply with the disclosure obligation, which covers the absence of the document as well as its inaccuracy or incompleteness. The omission of an approved risk prevention plan, of a classification in a soil information sector or of a loss compensated under the natural disaster cover constitutes a breach. The buyer retains the option between rescission and a price reduction sought from the court, subject to demonstrating the effect of the breach.

What is the time limit for acting after the discovery of pollution on a former industrial site? Article L. 514-20 of the French Environmental Code gives the buyer a period of two years from the discovery of the pollution to seek rescission of the sale, repayment of part of the price or remediation of the site at the seller's expense. The starting point is therefore not the date of the sale, which makes it possible to act several years after the acquisition. The same two-year mechanism running from discovery appears in Article L. 125-7 for land located in a soil information sector.

Is a clause excluding warranty as to the condition of the soil effective between professionals? It neutralises the latent defects warranty, but its scope stops there. It defeats neither fraud under Article 1137 of the French Civil Code, nor the special regimes of Articles L. 125-7 and L. 514-20 of the French Environmental Code, nor the duty of disclosure under Article 1112-1 of the French Civil Code, which the parties may neither limit nor exclude. A seller who knew of the pollution cannot in practice take refuge behind a boilerplate clause.

Must the ERP be provided before the preliminary agreement or at the notarised deed? Since Decree No. 2022-1289 of 1 October 2022 came into force on 1 January 2023, disclosure takes place in three stages: mention of the Géorisques portal in the advertisement, handing over of the statement of risks at the first viewing, then annexation to the preliminary sale agreement or, where there is none, to the notarised deed. The document is valid for six months and must be updated if that period has elapsed by completion of the sale by notarised deed.

Is the price reduction calculated on the cost of the clean-up works? Not necessarily. The reduction obtained under Article L. 125-5 corresponds to the loss in value suffered by the buyer as a result of the undisclosed risk, which the court assesses at its sole discretion on the basis of the valuation evidence produced. The cost of the works is an indication, but it may be higher or lower than the real effect on market value. That is precisely why a prior court-appointed expert report is decisive in setting the amount.

Is the notary liable where the ERP is defective? The notary has a duty of advice and must verify the effectiveness of the deed he receives, which includes the presence and apparent consistency of the mandatory disclosure documents. His liability may be sought where he received the deed without a valid ERP or without drawing the parties' attention to a manifest inconsistency with the public information available. This action is subsidiary and does not dispense with acting against the seller under the French Environmental Code.

Does a buyer in a share deal benefit from the actions under Article L. 514-20? No. These regimes presuppose a sale of real property. A person who acquires the shares of the company that owns the property takes on the environmental liability without having the statutory option of rescission or repayment of part of the price. Protection rests exclusively on the prior audit, on the environmental representations and warranties in the asset and liability warranty agreement, and on the security attached to that warranty.