ALP: I am buying property. Should I perform an environmental investigation even though the current operation does not use any hazardous materials?
Yes. Evaluation and allocation of potential environmental risks is an important component of the acquisition of real estate. Environmental problems often are not readily apparent and it is important to utilize the expertise of a qualified environmental professional to evaluate the property’s environmental condition. This protects you against liability and it assists in valuing the asset.
In most instances, owners and operators of property are liable for environmental problems regardless of whether they caused or contributed to the problem. Environmental investigations typically start with a Phase I, a non-invasive assessment of the potential that hazardous materials and other adverse conditions have impacted the property. However, a Phase I site assessment may not be sufficient, as they typically do not consider issues such as asbestos, lead-based paint, radon, mold and indoor air quality problems, all of which can significantly impact the property. If there is reason to suspect adverse environmental conditions, a Phase II is typically performed to sample soil, groundwater and other affected media.
A qualified environmental consultant should perform the investigation. The consultant should be selected the same as you would choose any other professional – by seeking referrals and carefully reviewing qualifications. The consultant’s contract should be carefully reviewed, focusing on the scope of services, reporting, confidentiality, liability limitations, insurance and indemnification. Qualified environmental counsel can assist in retaining such consultants, evaluating the potential environmental risks, and negotiating an allocation of such risks and liabilities between the parties to the transaction.