When the federal government's failure to regulate air pollution on time (as required by Congress) leads to environmental exposure of a state's residents, what remedies are there to protect the populace? Answer: the affected states can sue. That's exactly what happened when New York and Connecticut sued the United States Environmental Protection Agency (EPA) recently.
Have you been in the market to buy property, but learned that the property was contaminated? There are steps that you can take to avoid opening yourself up to liability.
Many insurance policies contain a "pollution exclusion" which seeks to exclude coverage for losses arising from pollution, except in the case of a "sudden and accidental" release. "Sudden and accidental" may bring to mind a burst pipe or overturned tanker truck, but a recent decision in the United States District Court for the Southern District of New York suggests that the interpretation can be much more complicated.
A federal court in New York recently decided that the migration of subterranean contamination onto a neighboring property was not, by itself, a sufficient basis to hold a neighboring landowner jointly liable for remediation costs under the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA").
In our series highlighting the tools of environmental due diligence in real estate transactions, we've covered the basics of (1) what is "environmental due diligence," (2) what are the important environmental provisions you need in a purchase and sale contract, and (3) what environmental investigations and audits you need to undertake after signing the contract. In our final post, we'd like to discuss what to consider when selecting and working with the environmental consultant who, with the help of the environmental attorney, will be performing much of the due diligence work on the property.
So now you've selected your property and have a proper purchase and sale agreement in place; what do you do next?
In our first post in this blog series, we explained exactly what is meant by the term "environmental due diligence" in real estate transactions and discussed some of the "tools" of environmental due diligence. In this post, we'll cover in detail one of those tools: the contract of sale for real property.
Post-closing covenants will be required for a borrower in a loan transaction, or a tenant in a lease transaction.
1. Borrower will be required to comply [in all material respects] with Environmental Requirements, to notify lender promptly in writing after knowledge in the event of any release which violates any applicable Environmental Requirement, of any Adverse Environmental Condition
In a sale or loan transaction the most important pre-closing covenant is that the borrower or seller will maintain the property in compliance with all environmental laws and will re-affirm accuracy of the representations and warranties as of the closing date.
Although the possession of and compliance with all necessary permits is important information for a buyer expecting to continue a business or a lender depending on the viability of a business, representations regarding permits do not necessarily cover potential liabilities for remediation or third party damages.