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Serving clients in Hawaii and throughout California, including Sacramento, Los Angeles, Chico, Jackson and San Diego

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What environmental risks should businesses consider in real estate transactions?

What environmental risks should businesses consider in real estate transactions?

| May 4, 2021 | Firm News

When you are a business owner looking to purchase a new location, you have to consider more than just the property’s location, structures and space, and how well it will suit your business’ needs. You also have to consider what environmental risks come with buying a specific property. This is especially important if you are purchasing a former gas station, auto shop or dry cleaners.

If the property you purchase caused environmental contamination in the past, you may be responsible for handling any environmental cleanup needed to mitigate that contamination. You need to be careful when considering a commercial real estate purchase. You want to know what costs might be involved in cleaning up environmental contamination and if you will be responsible to take care of that.

Here are six things you should keep in mind about evaluating the environmental risks of a commercial property purchase:

  1. You can have an environmental risk assessment done, especially if the property is in a brownfield area, and seek legal counsel about finding lost-cost ways to address any environmental cleanup needed.
  2. See if your business could qualify for a state or community program that helps to pay for pollution cleanup.
  3. If you are purchasing from a property from another business that currently operates on the site, check to see if it has followed environmental laws and sought appropriate environmental permits for its operations. You also need to evaluate how the business operates to minimize environmental damage. Plus, has it has taken appropriate follow-up steps if environmental contamination has occurred in the past?
  4. You need to evaluate if any properties adjacent to the one you plan to purchase have had environmental contamination problems. If so, drinking water pollution or vapor intrusion could become a problem on the property you intend to purchase.
  5. Inspect a property closely, looking for areas where asphalt or vegetation was replaced recently. Upgrades in these areas could be a sign of cleanup after a chemical spill.
  6. Buy insurance to cover the costs of a future environmental cleanup, which sometimes can cost millions of dollars.

When you want to buy commercial real estate for your business, you must do due diligence. You need to know what environmental regulations you will need to meet and what contamination cleanup costs may be. With help, you can get a better idea of which real estate property will make a good investment, even if it does need some environmental remediation.

 

 

 

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