Saturday, January 23, 2016

A Real Estate View on Environmental Assessment

Why? Cost? What if Problems Exist? Remediation?

Although we are not engineers in the environmental industry, we do see "Environmental Assessments" as part of the due diligence process. The above questions are a good place to start and gives you a practical "Real Estate View" with respect to EAs.

WHY - any EA (be it a Phase I, 11, or Ill), will identify either actual or potential property/site environmental issues. Some may be minor in nature, whereas others may be seriously problematic and pose major risks to users of the property. Beyond identifying environmental issues, a proper report should provide a series of recommendations to deal with and correct the problems outlined.

COST - will vary based on the type of report required and the depth of analysis needed. Every jurisdiction will have both national and local firms which specialize in EAs. Best practice is to compare services between 2 or 3 providers and be realistic based on the history of the subject property. Lowest fee is not always the way to go - again, you get what you pay for.

WHAT IF PROBLEMS EXIST - from a transactional standpoint, this is why you have a DUE DILIGENCE REVIEW built in to your offer. Beyond the problem(s) identified, there is going to be a cost to correct. Options may include:
  1. terminate the deal
  2. request the cost to correct be at the expense of the Seller
  3. accept the problem and assume the liability
  4. review all details and any proposed resolution with the lender
REMEDIATION - this is the common term for correcting the problem, and applies more in the event of complex matters - ie. contaminated soil,asbestos removal, underground tanks etc. Two key points here:
  • ensure the engineer who created the report remains involved through the remediation period
  • ensure a final report clearing the matter is obtained upon completion of the work
Again, the lenders need to be on-board with all matters relating to the EA, otherwise your financing could be at stake. Would love to hear about your experiences on EAs - and yes - the good, the bad, and the ugly.

As always, feel free to connect with us on Commercial Properties here in Windsor - Essex!

Mark Lalovich
Office: (519) 966-0444
Cell: (519) 259-5434

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