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Environmental Issues

If you are selling a property, the worst way to find out that there are possible environmental, health or safety issues is from a Purchaser who is doing its due diligence, especially when it is under a signed purchase contract. Now you know about it so that even if the deal doesn’t close, you will have to tell subsequent prospective purchasers and lenders. Not to do so is fraud. At best, Purchaser will beat you down on the purchase price, retain some of the purchase price in escrow until the problem is solved “to its sole satisfaction,” or a combination of the two. Better to do your own due diligence prior to listing or refinancing as if you were purchasing and to solve the problem your own way.

Ohio has an audit privilege law. Check with your attorney and maybe what you discover by investigating your property won’t be used against you by regulatory authorities – even if it is reportable.

Speaking of reports, I used to say that the most vexing problem in environmental law was, “How clean is clean?” Not so now. There are risk-based, regulatorily-prescribed clean up standards for soil and groundwater. Now I think the most difficult question is, if you find contamination on your property or if you have had a chemical release of some kind, do you have to tell someone, especially regulators, about it? Certainly you don’t want to fail to report if it is required – you’ll pay dearly and maybe do time. But not all releases need to be reported. Again, it is a tough question that should be answered only by an experienced environmental attorney and not solely by an environmental consultant/engineer.

If you are considering acquiring or assuming any interest in real estate, even if it is a gift or an inheritance, DO AN ENVIRONMENTAL ASSESSMENT IN ADVANCE. “Buyer Beware” is alive and well – especially under environmental laws. This means prior to a purchase, a lease, a mortgage, a stock purchase, etc.

An environmental assessment, even an ASTM Phase I, is not like a building inspection in that the former will not include important items, e.g., asbestos, if not specifically added. The assessment should be custom crafted for each transaction.

Sometimes the best advice an environmental attorney gives is recommending a specific environmental consultant or engineer for the issue. I will mention below the need, or not, of having an attorney review contracts, but for now, an environmental service contract is certainly one that requires legal review.

The best and most cost effective time to engage an attorney in a real estate or business transaction is prior to signing anything. As an example of a common mistake, a contractual risk allocation for a release of a “hazardous substance” (say, to Seller, if it occurred prior to Closing) will not apply to a release of “petroleum” as that term has been defined by federal statute. You don’t want to find an old underground tank while digging your footer and discover that your contract doesn’t say what you thought it did.

Don’t forget the Fire Code when considering obligations for underground tanks. The Fire Code applies to a broad range of tanks, many of which are not regulated by the underground tank regulations and BUSTR.