When buying commercial real estate, it is crucial to consider more than just finances. Understanding a property’s environmental impact is equally important. Disregarding environmental rules can lead to severe consequences, especially for commercial property owners. Penalties such as hefty fines, cleanup costs, business disruptions and even criminal charges make environmental due diligence a must before any property purchase.
Understanding a property’s environmental condition
All properties have some environmental implications. Environmental site assessments (ESAs) can tell if a property has existing or potential environmental issues. It spots problems that could affect a real estate deal or lead to legal duties in the future.
An ESA looks at the environmental risks of purchasing, developing or operating a commercial property. The process typically involves:
- Phase I ESA: Examining the property’s history, reviewing records and inspecting for potential contamination concerns.
- Phase II ESA: If Phase I finds issues, this step might include testing soil, groundwater, or building materials to assess the type and extent of any contamination.
ESA also considers how a contamination might affect people’s health in the area. For example, a former auto repair shop could have cracked or impacted underground tanks. This can lead to soil or groundwater contamination.
Consequences of noncompliance
Ignoring ESA due diligence might lead to buying a property with environmental liabilities. If an owner purchases a contaminated site without getting an ESA, they could be responsible for cleanup costs and other legal duties.
ESAs protect the property owner’s investment and the environment. Failing to conduct a thorough ESA could result in unexpected costs, legal disputes or harm to the property’s reputation. While navigating ESAs and other commercial real estate processes can be complex, an experienced lawyer can guide owners through the process, explain findings, and advise on necessary actions. Capable legal support ensures owners meet all requirements and potential risks are identified and mitigated.