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Environmental Due Diligence Boot Camp
Lesson 5:   Risks, Liabilities, and Consequences 
Part 1

Lenders generally face only very limited, if any, statutory liability for cleanup of contaminated sites (see Lesson 6).


However, a lender may lose the balance due on a loan that is secured by a contaminated property if the owner (debtor) decides to walk-away from the property, or if a state environmental agency exercises a superlien against the property.




Real Estate Brokers:


Real estate broker liability depends primarily on the real estate laws that prevail the geographical area where the broker practices.


Many states have real estate laws that require brokers to disclose, to prospective purchasers (and in some instances, prospective tenants), all information (both good and bad) they possess concerning the property they are representing.  In a few states, this duty to disclose extends even to information that the broker reasonably should have known.


Failure on the part of a broker to disclose the presence or likely presence of environmental contamination might be regarded as misrepresentation, which potentially could result in: The transaction being nullified; the broker being held liable for damages (including, possibly, the cost of contaminant cleanup) experienced by the buyer; licensing sanctions; damage to the professional reputation of the broker.





Tenants are “operators” on a property, and therefore can have statutory liability for the costs associated with investigating and remediating a contaminated property that they have occupied. 


A tenant can potentially be held financially responsible for cleanup costs for contamination that occurred before they occupied the site. 


If a tenant does not document the condition of a leased property when they leave, they can potentially be held responsible for adverse environmental impacts that occur after they have left the site. 



Tenants can also be adversely impacted by practical liabilities (see Lesson 1), particularly those which restrict or limit their ability to develop, improve, and/or use the distressed property.





                                                                                                                                                                                                                                      PART 2
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POSTED:  23 December 2010