Buyer Beware: Environmental Hazards

Are you considering purchasing real estate for your business? Before you enter into a contract to purchase that property, you should ask about the land’s history as well as the history of the neighboring area. The reason you need to know is illustrated in the following scenario:

You want to build a retail store on a corner lot in the center of town. The real estate broker and others have told you that a tire shop operated at that location for 20 years until destroyed by fire. The lot is now empty except for a concrete pad. The location is ideal. What you don’t know is that a gas station operated on that property between 1965 and 1980. The underground gasoline and kerosene storage tanks have leaked. In addition, the tire shop and the gas station performed oil changes and discarded dirty oil in the back of the property. Right next to this land is a car dealership that has been in operation for 30 years and also performs auto repairs. There are 80 year old homes situated a mile from the prospective property, some of which still have active wells which are being contaminated by various petroleum products.

In such a case, the Department of Environmental Protection (DEP) will notify the new owner and order immediate action to be taken. As the new owner, you would be responsible for the clean up of the hazardous materials or face stiff penalties for failing to comply with DEP’s directive. In addition, the surrounding homeowners may seek legal action due to the well water contamination. The end result is that you would then be involved in costly litigation to determine who is ultimately responsible for the contamination and environmental hazard. By retaining a competent environmental consultant before you purchase you can avoid liability. The consultant could identify potential concerns or current problems. Knowledge of an adverse condition enables you to negotiate a better price, to require the sellers to perform the clean up, to require the seller to assume liability and/or the cost of the clean up before the sale, or to simply choose another property. In addition, you could be eligible for certain government programs that exist for the purpose of the clean up of hazardous sites. Your ultimate decision to purchase a commercial property must be based with full knowledge of existing conditions and the liability for those conditions.