As a commercial property owner, you will likely face numerous risks when investing in real estate. While the financial risks associated with commercial buildings are commonly discussed, the environmental dangers that commercial real estate investors often encounter are rarely discussed.
What are some common environmental regulations?
Depending on when the property you are interested in was built or how it was used, there could be environmental regulations that the building does not comply with. Some of the most common environmental hazards to look for include:
- Emerging contaminants: Emerging contaminants have become a nationally known issue in the last few years. This is mainly due to the fact that there have been scientific advances that allow researchers to detect minute levels of pollution. To avoid liability, potential investors can acquire an insurance policy. Investors can also draft an indemnification and hold harmless agreement, which protects commercial property buyers from litigation concerning pollution, in this case.
- Soil vapor intrusion: Groundwater pollution is another significant concern for commercial real estate owners. If soil or groundwater pollution is discovered, the Environmental Protection Agency will require the property owner to cover the costs associated with installing a ventilation system.
How to identify and handle environmental risks
To better protect themselves from potential litigation, commercial real estate buyers should understand the common ways to discover environmental risks and hazards. Before finalizing the purchase of a commercial building, a Phase I Environmental Site Assessment should be performed. This assessment evaluates the building’s past and current use to uncover any ecological liabilities.
If contamination is found on the premises, performing a second evaluation called a Phase I Environmental Site Assessment is recommended. This additional assessment helps potential investors discover how serious the pollution is and the available options for handling the contamination.
Making any major investment or purchase involves some inherent risk. But, commercial real estate buyers can shield themselves by understanding the ecological dangers that could be present. To limit the possibility of a lawsuit, investors may want to speak with a local commercial real estate attorney before finalizing their purchase.