Land purchase and site risk

Port Port

Description (What is the Risk)

The risk of acquiring title to the land to be used for a project, the selection of that site and the geophysical conditions of that site.
Planning permission.
Access rights.
Security.
Heritage.
Archaeological.
Pollution.
Latent defects.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Contracting Authority bears the principal risk as it is best placed to select and acquire the required land interests for the project.

That said, there may be some areas where risk will be shared with the Private Partner. Whilst the Contracting Authority may be able to secure the availability of the corridor, the suitability of the corridor may be dependent on the Private Partner's design and construction plan.

The Contracting Authority would generally be responsible for providing a 'clean' site, with no restrictive land title issues, and existing utilities and contamination. Existing assets proposed to be used in the project should also be fully surveyed and warranted.

The Contracting Authority will normally hand over the site to the Private Partner in an 'as-is' condition. The Private Partner may take the risk for dealing with adverse conditions revealed by surveys regarding unforeseeable subsoil risks.

Where it is not possible to fully survey prior to award risk will be allocated to Contracting Authority or shared.

Mitigation Measures (What can be done to minimize the risk)

The Contracting Authority should undertake detailed ground, marine, environmental and social assessments and should disclose such information to the Private Partner as part of the bidding process. Such assessment should consider any easements and covenants, etc. that may encumber the land

The Contracting Authority should, to the greatest extent possible, ensure that it has a complete understanding of the risks involved in securing the site and the site constraints that will impact on the construction and operation of the system.

The Contracting Authority should also manage any indigenous land rights issues that may impact on the use of the site.

Prior to awarding the tender the Contracting Authority could (through legislation and a proper consultation process) limit the ability for potential land right owners or neighbouring properties and trades to raise claims on the land and/or for injurious affection.

Government Support Arrangements (What other government measures may be needed to be taken)

The Contracting Authority may need to use its legislative powers to secure the site (e.g. through expropriation / compulsory acquisition).

Even where you have a legally clear site, Government enforcement powers may be needed to properly secure the site for the private sector. There may be historic encroachment issues that the Private Partner cannot be expected to deal with.

Examples include the need to manage the relocation of people (e.g. the removal of informal housing or businesses) and continued efforts to manage the social and political impact of the project on and around the site.

The Contracting Authority may be required to provide additional site security / assistance during operations to manage this risk.

Comparison with Emerging Market

Land rights and ground conditions in developed markets are typically more established and risks can be mitigated with appropriate due diligence with relevant land registries and utility records.



Back to Port

Description (What is the Risk)

The risk of acquiring title to the land to be used for a project, the selection of that site and the geophysical conditions of that site.
Planning permission.
Access rights.
Security.
Heritage.
Archaeological.
Pollution.
Latent defects.
Channel dredging.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Contracting Authority bears the principal risk as it is best placed to select and acquire the required land interests for the project.

The Contracting Authority would generally be responsible for providing a 'clean' site, with no restrictive land title issues, and existing utilities and contamination either dealt with or fully surveyed and warranted. Existing assets proposed to be used in the project should also be fully surveyed and warranted. The Private Partner may take some risk for dealing with adverse conditions revealed by surveys but other unforeseeable ground risks (e.g. archaeological risks) are likely to need to be held by the Contracting Authority.

On brownfield port projects the Contracting Authority may take the risk in all or part of the existing port infrastructure handed over to the Private Partner prior to commencement of any expansion to ensure a certain minimum standard is achieved.

Over the term of the concession the Contracting Authority may be required to continue to provide supporting infrastructure work such as ensuring that the channels are dredged and maintained at the required depth and that connecting roads, railways and utilities continue to be provided.

Mitigation Measures (What can be done to minimize the risk)

The Contracting Authority should undertake detailed ground, marine, environmental and social assessments and should disclose such information to the Private Partner as part of the bidding process.

The Contracting Authority should, to the greatest extent possible, ensure that it has a complete understanding of the risks involved in securing the site and the site constraints that will impact on the construction and operation of the system.

The Contracting Authority should also manage any indigenous land rights issues that may impact on the use of the site.

Prior to awarding the tender the Contracting Authority could (through legislation and a proper consultation process) limit the ability for potential land right owners or neighbouring properties to raise claims on the land.

Government Support Arrangements (What other government measures may be needed to be taken)

The Contracting Authority may need to use its legislative powers to secure the site (e.g. through expropriation / compulsory acquisition).

Even where you have a legally clear site, Government enforcement powers may be needed to properly secure the site for the private sector. There may be historic encroachment issues that the Private Partner cannot be expected to deal with.

Examples include the need to manage the relocation of people (e.g. the removal of informal housing or businesses) and continued efforts to manage the social and political impact of the project on and around the site.

The Contracting Authority may be required to provide additional site security / assistance during operations to manage this risk.

Comparison with Developed Market

Land rights and ground conditions (in particular reliable utilities records, and land charges) in emerging markets may be less certain than in developed markets where established land registries and utility records exist.

In the absence of legislation in emerging markets, indigenous land rights issues and community engagement can be managed by the Contracting Authority through the adoption of IFC Safeguards for the project, particularly in order to ensure international financing options are available to the project.



Back to Port