March 2020

Regulations came into effect on 4 April 2018 which directly affect landlords of commercial premises. This article sets out the background and explains your obligations as a landlord.

What is the problem?

For many years, asbestos was a well regarded building material. It was strong, durable, fire resistant and water resistant. A few products that once contained asbestos were insulating board, friction linings, fire doors, gas or electric heaters, fuse boxes, gaskets, lagging around pipes, sprayed insulation and brake linings.

As medical science developed and evidence accumulated, it became clear that exposure to asbestos and asbestos-containing material (ACM) could cause serious health consequences. It is estimated that currently 170 New Zealanders die annually from asbestos-related illnesses.

WorkSafe has expressed a goal to halve this death toll by 2040. To that end, the Government introduced the Health and Safety at Work (Asbestos) Regulations 2016 (Regulations). These Regulations came into effect on 4 April 2018.

What buildings are affected?

It is safe to assume that a significant proportion of New Zealand buildings contain some form of asbestos. This is particularly so if they were built or renovated between 1940 and the mid-1980s.

The New Zealand Government banned the importation of blue and brown asbestos in its raw form from 1984 but didn’t bring in a full ban on the importation of ACMs until 1 October 2016. (In comparison the United Kingdom and Australia banned these imports in 1999 and 2003 respectively.) There was no ban on using up existing stocks of ACM. It is therefore conceivable that recently-built buildings could possibly still contain asbestos.

The consequences for commercial leases

A landlord has a duty of care as a person conducting a business or undertaking (PCBU) at the premises. It is very likely that there will be other PCBUs in relation to the premises, for example property managers, building contractors and tenants. This does not release the landlord from responsibility. All PCBUs must coordinate, collaborate and cooperate to keep the premises safe. The landlord cannot contract out of its responsibilities, even if other PCBUs will not cooperate.

The procedures set out in the Regulations will apply if the landlord knows or should reasonably know that the premises has ACM. It may be reasonable for a landlord to assume that the premises does not have ACMs if the building was constructed after say, 2000 or the landlord has reliable evidence that all ACM has previously been removed from the building or that the building never contained ACM.

However, if none of these circumstances apply, best practice is for the landlord to assume that the premises might contain ACM and take appropriate steps. The first step is to identify whether ACM is present. A survey should be carried out by an experienced and qualified surveyor.

Asbestos management plan

If ACM is identified, the landlord must then prepare an asbestos management plan. The plan must be signed off by an independent licenced sampling and removal company.

The plan must be in writing and should record:

• Where the ACM is situated.
• The state of repair of the ACM.
• The risks (for example, that exposure to respirable asbestos fibres is likely to occur when drilling or cutting into ACM).
• How the risk arising from ACM in the workplace is managed.
• How the workplace can ensure the ACM remains safe from airborne exposure until it is removed by licensed experts.
• The procedure for detailing incidents or emergencies involving asbestos.
• Clear statements about who can do structural/repair work on the building, the information and training they will be provided with and how workers’ health will be monitored.

A copy of the asbestos management plan must always be readily available to workers and other occupants. It must also be kept up-to-date. At a minimum, it must be reviewed at least once every five years. It should also be reviewed if any other relevant situation arises, for example if asbestos has been removed, sealed or disturbed, or if the plan is identified as deficient.

If the landlord has no immediate plans to do work and has taken reasonable care to ensure that the risks associated with the ACM have been contained, then no further action may be required except regular monitoring.

Structural work on the premises

When work is done on the premises, it must be done safely and without endangering workers or others, including tenants.

If the landlord wishes to carry out alterations or renovations which may expose the ACM, involving more than a 10m2 area of non-friable asbestos, then the landlord must commission an asbestos refurbishment/demolition survey. This must be conducted by an operator with a Class A or B licence. The operator will identify where the ACM is, how much there is and its condition. If it is in poor condition or will be disturbed or damaged, this will pose a serious risk to the workplace. The licenced operator must then follow the strict procedures set out in the Regulations for removal and/or sealing.

Consequences of non-compliance

If a PCBU fails to comply with its asbestos-related requirements, fines of up to $10,000 per individual and $50,000 for companies and other corporates can be applied. These fines will be cumulative if there are multiple offences.

These are some examples of fines and other financial consequences that have resulted from breaches of the Regulations:

• A construction company, Crafar Crouch Construction Limited, was fined $318,750 for not identifying and properly managing asbestos while demolishing two buildings in Blenheim. Their performance was described by Worksafe as ‘appalling’ and ‘utter negligence’.
• A Motueka boat sales and service company, Bays Boating Limited, was fined $108,000 for exposing workers to risks from asbestos during building demolition.
• A construction company, Blakely Construction Limited, was fined $45,000 for failing to properly identity and manage asbestos at a Christchurch demolition site. They did use an appropriate contractor, but then when additional asbestos was identified, good practice was discontinued.
• The manager of renovation firm Apartment Renovation Company was fined $40,000 for failing to test for asbestos and putting his staff in danger while renovating units in Auckland.
• A Retired Taranaki painter and decorator was fined $35,000 for failure to comply with asbestos management requirements when removing 6 sheets pf asbestos board from a garden shed.
• A director of Auckland demolition firm did not conduct a risk assessment or identify the location of the asbestos, which resulted in the spread of asbestos dust. This resulted in a risk of asbestos poisoning to neighbours and workers. In addition to $13,000 for clean-up costs, he was ordered to pay reparation of $36,000.
• A residential landlord was ordered by the Tenancy Tribunal to pay $4,000 in exemplary damages for exposing tenants to asbestos.
• The Tenancy Tribunal awarded $4,000 in exemplary damages to be paid by the landlord to the residential tenants, to compensate them for the risks they were exposed to during building work on the property which spread asbestos fibres.

Issues to consider for new leases

For a tenant, part of the due diligence process should be to ask the landlord for a copy of the asbestos management plan and evidence of any asbestos surveys that have been carried out. This particularly applies to any buildings built or renovated before 2000.

Landlords should ensure that they are complying with all their requirements under the Regulations, and that they don’t give any misleading or incorrect warranties regarding the asbestos position.

Both parties should consider who should pay the costs of an asbestos survey and any asbestos removal or containment during the course of the lease, and this should be specifically recorded as a further term of the lease. The survey itself is of benefit to both parties, particularly as both parties will be PCBUs in relation to the premises. It may therefore be fair that survey costs are shared. Removal and containment costs are more likely to be structural and therefore perhaps should be borne by the landlord.

Parties should also consider adding a further term dealing with any abatement or compensation for the tenant if the tenant is unable to occupy the premises for a period of time during asbestos related work or is otherwise inconvenienced.

Existing leases

Bear in mind that for an existing lease which does not address the asbestos issue, there is no clear guidance on who should pay for what costs. This opens both parties up to a great deal of uncertainty and potential cost and inconvenience. The parties will therefore need to negotiate their way through this issue.

Conclusion

Unless you have a solid reason for believing your building has no ACMs, you should identify your obligations in relation to asbestos and take prompt steps to meet those obligations. Please contact your Health and Safety lawyer or Commercial Property lawyer for more information.