ENVIRONMENTAL SURVEY UPDATE ARTICLES

ASSESSING THE NEIGHBORHOOD: A GUIDE FOR AVOIDING PROBLEMS FROM NEARBY SITES DURING PROPERTY TRANSACTIONS

In carrying out many of our recent real estate-based assessments, a common question that has arisen is whether or not environmental problems at a nearby site could delay the property transaction. Specifically, potential purchasers have been asking: Can a significant liabilities be present if I acquire a property next to or near a site with known environmental problems? 

The answer to this question is yes, but with careful study and preparation, this situation does not necessarily undermine the pending transaction. The key to successfully working through "nearby site" issues is to keep in mind the fact that there can be significant risk in acquiring properties adjacent to or near sites with environmental problems, even if those problems are documented and known to be the responsibility if another party. Therefore, as a potential buyer of a nearby property, you must take the proper measures to protect your interest during the due diligence period. 

The presence of contamination at a nearby property can affect the value of your site in several ways. Primarily, there may be direct or indirect exposure pathways by which the contaminants of concern can affect residents or tenants of your site. This can include the presence of active potable or process water wells which allow exposure to the contaminant, or a basement which may have vapors from an off-site volatile contaminant in soil or groundwater, such as PCE or gasoline. Additionally, an off-site impact can often extend onto the subject site above state or federal action levels, which places the owner of the subject property at risk of being involved in the eventual cleanup. Such frightening scenarios, while rare, have actually occurred when the parties responsible for the nearby site cleanup default on their responsibility to complete agency-mandated investigations or remediation through bankruptcy or other factors.

If you are looking into a property, but are aware of a potential off-site source such as an adjacent service station or a federal cleanup site down the street, you must take certain steps before proceeding with the property transaction to protect yourself. First, you and your consultant should identify the nature and extent of the problems from the off-site source which could represent direct or indirect exposure pathways onto the subject site. This is performed initially through a database screening which is a part of RT's standard Phase I Environmental Site Assessment work scope, but can also be performed separately. Regulatory agency file reviews can also be conducted, which often provide detailed information regarding the nature of investigation or cleanup activities at a site. Once this information is obtained, an assessment of the responsible party's plans and/or ability to carry through the required environmental work should be assessed through discussions with the overseeing state or federal agency.

These initial steps often lead to satisfaction on the part of the potential property owner, and provide a more solid footing on which the transaction may proceed. If such initial measures are not taken, these issues run the risk of ending up in litigation, to the dissatisfaction of all parties involved. It is therefore best to foresee these potential circumstances early within the due diligence period, and approach them intelligently throughout the transaction process.

We at RT can help you use these screening tools and our experience to help you identify these problems before they delay your transaction. Don't hesitate to call Gary Brown at (610) 265-1510 or Glenn Graham (856) 467-2276 and we'll be happy to discuss your upcoming transaction and any associated environmental concerns.