Environmental Due Diligence in Transactions

Virtually every corporate real estate transaction requires environmental due diligence. The risk of purchasing property without knowledge of site contamination is that most jurisdictions impose liability for contamination on the property owner without regard to whether the property owner caused the spill, release or other disposal of chemicals.

In addition to this general concern, numerous statutes, from TSCA to RCRA and their state equivalents can create liability for investigation and cleanup or closure. This can be very expensive. The burden can transform a good deal into a liability.

Happily, using a qualified consultant to conduct due diligence under the supervision of an experienced environmental attorney can help you identify risks and make good business decisions how to manage those risks.

Due diligence includes review of historical site ownership, consideration of recognized environmental conditions, sampling of the soil and groundwater to confirm or disprove the presence of contamination, consideration of indoor air conditions, review of government agency records for historical site compliance (or non-compliance), wetlands restrictions, and more.

Just as you would want an engineer’s evaluation of the structural integrity of a building, for example, you should know the condition of the real property itself.

If there is contamination, you may qualify for financial assistance through the local brownfield authority. You may be able to trigger statutory protections against incurring liability. You can evaluate the potential for the contamination to affect your operations. And as you negotiate your transaction, you can consider including terms in the purchase agreement to avoid the seller shifting its responsibility to you as purchaser.

If actions are required to address the contamination, you can evaluate potential steps to install engineered controls or institutional controls such as deed restrictions (do not use the groundwater, for example), and in that light, consider modifying the terms of the transaction to reflect the assumed burdens.