What you don’t know can hurt you.
In 1980, the United States Environmental Protection Agency (EPA) enacted the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Under CERCLA, a property owner, property manager, lessor, or lender can be liable, by virtue of property ownership or control, for remediation of hazardous substances in the soil and/or groundwater underlying a site, even if the property owner did not cause or contribute to the contamination. To avoid this potential liability, anyone purchasing commercial or industrial property should complete a Phase I Environmental Site Assessment as part of their due diligence. So long as they do this and no environmental issues are noted, then they have now established an “Innocent Landowner Defense.”
A Phase I site assessment is typically ordered from an environmental firm that specializes in the same. Their Phase I investigation will involve a review of property records dating back as early as 1940, a site inspection, interviews with the owners, occupants, neighbors and local government. This helps the firm preparing the report to determine whether there are underground storage tanks on the property, or whether there might be contamination from on-site activities or from activities on a neighboring property. Even environmental issues at a property that doesn’t directly neighbor your property can make their way to you. It is important to know about nearby sites that have documents releases or have “high risk” uses, like dry-cleaners, gas stations, or manufacturing facilities. Even if you won’t be responsible for the contamination on other properties, you still need to know about the impact on your property as it could pose a health threat or cause big problems when you try to resell the property.
Regardless of whether the property has been residential for 20-30 years, if you want to avoid any sort of potential liability under CERCLA, get a Phase I site assessment. Forty years ago, environmental regulations were different and releases often went unreported. And while these assessments can be costly, running upwards of $1000-$2000, in the long run, it is like paying a one-time premium for insurance that you are not assuming someone else’s problem. If you have questions about this or other issues that may arise with property ownership, contact the Real Estate attorneys at Lavelle Law, Ltd. for your complimentary one hour consultation at (847) 705-7555.