Environmental Due Diligence in Real property Transactions
People who plan to transact with real property: buy, sell, refinance; or even just be the facilitators of the transaction, have various factors to consider. One is the possibility that the land may be contaminated; and not all land contamination maybe straight off visible to the naked eye.
The contamination might have taken place years ago, long before the interested party had anything to do with the land. It might even have happened several generations of landowners ago.
How could one then ensure that they would not be held liable for the damage that’s been done to the land, to neighboring properties, or even the contingent damages that may befall a ruined transaction?
To prevent this situation, the EPA has established the “All Appropriate Inquiry (AAI)” process: evaluating the environmental conditions of a property in question and determining the potentials for environmental cleanup liabilities.
The AAI requirements apply to any party who may potentially need to show they are not liable, either as an innocent landowner, a bona fide prospective purchaser, or a nearby property owner.
The AAI Rule requires that the investigative work be done by a qualified Environmental Professional, and it establishes the needed qualifications. Some of the required research includes interviews with past and present owners, operators and occupants; reviews of historical sources of information; reviews of federal, state, tribal and local government records; and visual inspections of the facility and adjoining properties.
In following the AAI requirements, the Users of the reports obtain immunity from a liability to various federal and state laws that seek to penalize responsible parties for the environmental damage. The AAI practice of investigation also provides a good commercial approach to investigating various other environmental pitfalls that could be associated with real estate transactions.
A key factor in conducting AAI and/or similar processes is the engagement of professional experts. In many cases, the cost of the investigation dwarfs in orders of magnitude against the financial risks of the transactions. Our firm has been in the forefront of the AAI process since 1987, at times being instrumental in establishing the very factors of the process. Please feel free to contact us for any question or need. |
