If you buy property with environmental issues, you may be
liable, even if you were not responsible for the presence of
contaminants. To best protect yourself, be sure to include
environmental review as part of your due diligence.
Why Conduct Environmental Due Diligence
The most obvious reason investors conduct environmental due
diligence is to know what potential liability exists under the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) and to calculate the remediation cost into the purchase
price. CERCLA rules may result in fines and require you to remove
hazardous materials at your own expense.
If environmental due diligence exposes previously unforeseen
issues, an appraiser may reduce the property's value. This
could prompt a buyer to renegotiate the purchase price or abandon
the deal altogether. A buyer could also be alerted to the need for
environmental liability insurance coverage.
