Purchasing any commercial property involves some level of risk. However, buying potentially contaminated property can be especially risky due to liabilities, legal considerations, and potential harm to clients, businesses, and interests involved in the sale.
As a potential property owner, should you be concerned about buying property with environmental issues? Yes. But that does not mean that you should not buy the property at all. You must simply perform your due diligence before committing to the deal.
Below, we discuss some risks associated with buying property with environmental issues. We also outline what you should do before buying. These simple steps will protect you and everyone else involved in the deal — from professionals to attorneys and clients.
Risks Associated with Buying Property with Environmental Issues
There are many risks linked to buying contaminated real estate. Some of the most notable problems include the following:1. Civil Liability
There are many laws designed to hold landowners accountable for contaminating natural resources. One of the most significant is the Comprehensive Environmental Response, Compensation, and Liability Act (known as CERCLA). Under CERCLA, landowners can be sued for causing contamination. They may be required to pay for cleanup efforts. This can be the case even if there was pre-existing contamination. These challenges can affect business activities and expose people to health risks or injury. Landowners can also be sued for damages. For example, workers injured by asbestos or other hazardous materials can file a lawsuit. These suits may cost landowners thousands in legal fees and court-imposed penalties. Buying previously developed land involves the biggest liability. Sites that have been used to store hazardous material are especially concerning. Older buildings may have used asbestos, adding to the risk. Undeveloped land is less likely to be contaminated. Still, buyers should perform due diligence to protect their business investment.2. Poor Return on Investment (ROI)
Buying property with environmental issues can reduce ROI. If a buyer did not know about contamination, they might overpay for a property. Even if they know, it is important that they understand the scope of contamination. This will let them accurately estimate cleanup costs. Contaminated property reduces ROI in several ways. First, buyers may not be able to use the land as quickly as they expected. Cleanup efforts can delay activities and uses by weeks or months. Secondly, property with environmental issues might be less valuable than expected. This would reduce the buyer’s ROI if they intended to improve and flip the land. It will also make it difficult to resell the land if they need to abandon their investment.3. Require Extensive Cleanup
Sites with environmental issues may require extensive cleanup. These efforts, often referred to as environmental remediation, are particularly challenging in areas with air or groundwater pollution. Remediation can be very time-consuming and expensive. Cleaning up air or asbestos-related problems is particularly costly. Performing due diligence will help buyers understand the cost of cleanup efforts. They can factor these costs into their offer. This will prevent them from overpaying for land that will require major remediation.What to Do Before Purchasing Property with Environmental Issues
As you can see, there are risks associated with buying property with environmental issues. Again, that does not mean that you should not purchase the property. It just means that you must evaluate your decision carefully. Specifically, we suggest that you do the following before making a purchase:1. Schedule an Environmental Site Assessment
An environmental site investigation or ESA will reveal any recognized environmental concerns (RECs). There are two types of ESAs: Phase 1 and Phase 2. – Phase 1 ESAs involve a review of property records and an on-site inspection to identify RECs. – If RECs are found, a Phase 2 ESA may be recommended, including soil and groundwater testing to measure the severity of the issue. The data collected through this process will guide your decision-making in order to protect your rights, minimize liabilities, and ensure your interests are safeguarded.2. Review Environmental Regulations in Your State
There are many federal environmental regulations, and each U.S. state may have additional laws. Some local municipalities may enforce even more strict environmental controls. Buyers should become familiar with these regulations to ensure compliance. Doing so will also help buyers understand how ESA findings affect the property’s value and potential sale strategy.3. Weigh ROI vs. Cleanup Costs
Buyers must balance potential business interests with the cost of environmental cleanup. If the cleanup cost greatly exceeds the expected return, the sale might not make financial sense. However, in some cases, cleanup may be manageable, and the investment still worthwhile. Buyers should carefully analyze this balance before moving forward.4. Make a Purchasing Decision
Using the data from ESA reports, buyers can negotiate pricing or decide to walk away from a problem property. Having support from legal attorneys or environmental professionals may be essential at this stage.Consider RSB Environmental for Commercial Real Estate Support
Buying property with environmental concerns is risky, but not impossible. You simply need to do your due diligence, analyze the challenges, and understand all the considerations. If not properly investigated, you could unknowingly buy contaminated land, face legal injury claims, or be burdened by high remediation costs. RSB Environmental helps you manage these risks with expert ESA services. From Phase 1 and Phase 2 ESAs to remediation, we guide you through every part of the process to make an informed and legally secure investment. To learn more about how to get started, book a consultation with our team. One of our experienced environmental professionals will be happy to help!Frequently Asked Questions
What are the biggest risks of buying contaminated commercial property?
Buyers face legal liabilities, high remediation costs, and reduced ROI. Injury claims and lawsuits may arise if contamination harms people working on or near the site.
What is the role of an attorney in this process?
An attorney can help interpret environmental regulations, review ESA results, and ensure your rights and legal interests are protected before the sale.
How do asbestos-related issues affect a property purchase?
Asbestos contamination can lead to major cleanup costs and serious health problems. It may also trigger legal action and complicate the property’s use or sale.
Why is a Phase 2 ESA necessary?
A Phase 2 ESA provides scientific data on contamination levels through investigations, such as soil or water testing. This helps estimate cleanup costs and assess the impact on your business plans.
How can RSB Environmental help businesses with environmental due diligence?
RSB Environmental supports clients, professionals, and businesses through the full environmental review process. We offer ESAs, remediation, and expert guidance to navigate complex property considerations.
