Transactions

We Help Companies Manage the Environmental Risks Involved in Real Estate and Commercial Transactions

Real estate and commercial transactions can present a wide range of risks. When entering into these transactions, an informed approach to risk management is critical. Acting on incomplete information and making uninformed decisions can expose companies to substantial liability that they could—and should—have avoided.

While this is true across the board, it is especially true in the area of environmental compliance. Companies in all industries can face environmental risks arising out of transactions ranging from engaging third-party vendors to acquiring developed properties and vacant land. Understanding these risks is the first step; with a clear grasp of the risks involved in their companies’ transactions, company owners and executives can make informed, strategic decisions focused on protecting their companies now and in the future.

Examples of Potential Environmental Risks in Real Estate and Commercial Transactions

When pursuing real estate and commercial transactions, understanding the environmental risks requires a comprehensive assessment of the nature of the transaction, its potential environmental impacts, and the compliance obligations these impacts entail. It also requires a comprehensive assessment of any non-compliance-related liability risks; and, in real estate transactions, it requires a comprehensive assessment of the property itself. With this in mind, some examples of potential environmental risks that may require careful consideration prior to closing include:

Soil and Groundwater Contamination

Soil and groundwater contamination can give rise to substantial liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and other environmental laws. While purchasers and other downstream parties can often avoid liability for pre-existing contamination (i.e., by qualifying as a “bona fide prospective purchaser,” or “BFPP”), doing so requires a proactive approach guided by a clear understanding of what the law requires.

Surface Water Contamination

Surface water contamination presents similar liability risks. Oil, gas, industrial byproducts, and other contaminants are strictly regulated not only at the federal level, but also at the state and local levels in many jurisdictions. Whether buying properties or working with third parties whose operations pose surface water contamination risks, companies need to ensure that they are taking the necessary steps to protect themselves going forward.

Hazardous Materials

Numerous types of hazardous materials are subject to strict statutory and regulatory requirements. Noncompliance with these requirements can trigger substantial liability, and even when third-party vendors are responsible for hazardous material management, this does not necessarily insulate companies from liability. As a result, when negotiating contracts that involve hazardous materials, companies must ensure that they protect themselves appropriately.

Vapor Intrusion

Vapor intrusion from contaminated soil or groundwater can present health risks above and beyond those presented by the contaminated soil or groundwater itself. As a result, the risk of liability related to vapor intrusion is another concern that will require careful consideration in many cases. Here too, the potential risks relate not only to compliance costs (and the costs of noncompliance) under CERLA and other pertinent environmental statutes, but to potential civil or commercial liability as well.

Other Environmental Effects of Commercial Operations

From polluting the air to endangering protected species, and from endangering protected wetlands to releasing per- and polyfluoroalkyl substances (PFAS) into the environment, commercial operations can pose numerous other environmental risks as well. As a result, effective environmental risk management during the pre-closing process truly requires a comprehensive approach. Once company owners and executives have a clear and comprehensive understanding of the risks they need to address, then they can make informed and strategic decisions about how best to proceed under the circumstances at hand.

Our Environmental Risk Management Services for Transactions

Within our environmental practice, we help companies understand and address the environmental risks associated with all types of real estate and commercial transactions. This includes compliance risks arising at the federal, state, and local levels, as well as other liability risks associated with potential environmental harms. Our environmental risk management services for transactions include:

• Environmental Risk Assessments – Our lawyers comprehensively assess the environmental risks that companies need to consider when pursuing real estate and commercial transactions. After identifying the pertinent risks, our lawyers advise our clients regarding the nature and scope of these risks, the relevant regulatory and statutory provisions, and the options they have available for mitigating these risks should they move forward.
• Environmental Due Diligence – Our lawyers assist companies with conducting comprehensive due diligence during the pre-closing phase of real estate and commercial transactions. When necessary, we can engage appropriate experts to conduct further assessments and analysis in addition to reviewing all relevant records, regulatory filings, and other pertinent documentation.
• Phase I, II, and III Environmental Site Assessments (ESAs) – When acquiring contaminated real estate, conducting environmental site assessments (ESAs) can serve two critical functions: (i) it can provide insight into the scope of the environmental risks at hand; and (ii) it can assist with securing BFPP status or otherwise avoiding successor liability. Our lawyers assist clients with conducting Phase I, II, and III ESAs.
• Contract Drafting and Negotiation – Our lawyers have extensive experience drafting and negotiating key contract terms focused on environmental risk management. These include representations and warranties, indemnification provisions, and other liability and cost-shifting provisions, among others.
• Insurance Coverage and Other Matters – Insurance coverage can play a key role in real estate and commercial transactions that involve environmental risks. Our lawyers assist clients with securing coverage, negotiating with their insurers, and taking the other steps that are necessary to provide the legal protection and financial security they need to feel confident moving forward.

These are just examples. With extensive experience in this area, the lawyers in our firm’s environmental practice group are well-equipped to help companies of all sizes navigate complex and potentially high-risk real estate and commercial transactions. If you would like more information about our experience or how we can help, we invite you to get in touch.

Speak with an Environmental Lawyer at McLaughlin & Stern

To speak with a lawyer in McLaughlin & Stern’s environmental practice group, contact us today. Call (212) 448-6247 or contact us online to schedule an appointment as soon as possible.