01 Apr Who is making me investigate my property?
Last time, we looked at why environmental investigations are needed at commercial and industrial properties. The big question now is, exactly who is requiring these investigations. The answer may not be exactly what you expect.
In the broadest terms, the American people require it. At least, the American people demanded laws to address pollution way back in the late 1960s and early 1970s. These laws, and subsequent ones, are enforced by the United States Environmental Protection Agency (USEPA) and, here in Connecticut, the Department of Environmental Protection (CT-DEP). These agencies also decide how the investigations and clean-up will be carried out. Even so, the vast majority of the environmental investigations are not conducted under USEPA or CTDEP programs. So who is driving this?
The answer, very simply, is the people who buy or finance the purchase of commercial and industrial properties. It really makes good sense, when you think about it. The federal and state environmental laws may not apply to your specific property; however the existence of the laws creates a potential future liability if pollution is discovered later. The laws have also raised awareness of site contamination and its potential effects.
As a property buyer or lender, you don’t want to inherit someone else’s mess. It makes sense to investigate the property (due diligence) to find out if any bad stuff is potentially lurking in the soils or groundwater under the site. The buyer and lender may be shielded from liability, even if the investigation results failed to identify pollution that was present, simply because they made a reasonable effort to determine the condition of the property. The liability may be shifted to the parties responsible for the creation of the pollution. All this assumes that the investigation was conducted in accordance with the prevailing standards of the time.
More importantly, the environmental investigation can identify potential contamination on the property prior to the sale. This provides the buyer and lender the opportunity to a) walk away from the deal or b) make financial and/or other arrangements to clean up the property as a condition of sale. The goal here is to protect the buyer and lender from liability.
Okay, if you’re an owner or seller of commercial and industrial properties, you’re probably not too happy right now. For many of you, however, there is also a benefit to investigating the property; especially if it is done before the property is put on the market.
Buyers often assume that commercial or industrial properties are contaminated and in need of remediation. They may argue that the contamination reduces the value of the property. Often, completion of an environmental investigation will delay the financing and closing on the property. By conducting the investigation of the property prior to sale, the condition (and the value) of the property can be documented. Should contamination be identified during the investigation, the seller has time to address the issue in the most cost-effective manner prior to the sale of the property. This allows the sale of the property to proceed without delay and without excessive cost.
The pre-sale investigation of a property also documents the condition of the property at the time of sale. Should pollution be discovered on the property at a later time, the data may show that the site was “clean” when sold, shielding the previous owner from liability.
The key point to remember is that the potential presence of pollution will always be an issue on commercial and industrial properties. Having quality environmental data protects the buyer, the lender, and the seller from liability for contamination that was not the result of their operations.