MEbiz Real Estate Insider – Environmental Patience: Take the Time to Do It Right

By Kat Joyce, energy law attorney

Kat Joyce

Picture this: You are negotiating the purchase of commercial real estate. You are working hard to keep costs down and get the deal done. Someone – your lawyer or your lender – starts making noises about environmental due diligence. Your heart sinks – that sounds complicated. And expensive. And time-consuming.

It doesn’t have to be. But there are a few things you really should know:

• Environmental due diligence is important. In ME, you can become a Potentially Responsible Party just by owning a piece of property with contamination on it. Under federal law, your best defense to a lawsuit (the “it wasn’t me” defense) is extremely difficult to invoke if you have not performed adequate environmental due diligence prior to purchase (a/k/a “All Appropriate Inquiry”).

• Environmental due diligence does not have to be prohibitively expensive. Use your purchase and sale agreement to describe some parameters about cost sharing or adjustments to purchase price depending on what you find; work with a reputable environmental professional who is willing to quote you a reasonable price for a Phase I Environmental Site Assessment.

• Be prepared to walk away. There is always the chance you will find something you didn’t want to know. There is also that chance that the seller is not willing to pay to clean it up. You have to protect yourself, and be prepared to walk away.

• Know what a VRAP is. A VRAP (or Voluntary Response Action Program) is a state program that you can participate in with the Seller to identify existing contamination, and to clean up the property only to the extent necessary to allow the particular use in question (e.g. commercial/industrial).Under the VRAP process, the State of ME will release the applicant from liability for known contamination on the site in exchange for completing any work at the site and necessary paperwork deemed necessary by DEP to ensure safe and appropriate use of the property.

Watch for future articles in the Real Estate Insider where each of these tools will be further explored.