One of the key ancillary documents in commercial real estate
loans is the environmental indemnity. Under federal and state
environmental laws, an owner of real property is strictly liable
for the remediation of contamination from hazardous substances on
such real property.
Environmental indemnities are typically executed by the borrower
and the guarantor collectively as the indemnitor and include
representations and covenants relating to hazardous substances and,
most importantly, from a lender's perspective, an
indemnification in favor of the lender for any claims or losses
arising from hazardous substances on the mortgaged property. Unless
otherwise negotiated by the indemnitor, the indemnity survives
indefinitely. Consequently, much of the negotiation between the
borrower and the lender centers around trying to limit when the
lender can make a claim under the indemnity.
