Exposure Highlights: Real Estate Transactions

The level of complexity involved in any real estate transaction is exacerbated when taking environmental concerns into account. The following are some of the environmental concerns for each stakeholder involved in a real estate transaction:

Seller – Regardless of environmental indemnity agreements, under environmental regulations, past owners of properties are potentially liable for environmental concerns that are uncovered at the properties after a sale.

Purchaser – Failure to conduct adequate due diligence of property prior to acquisition. This is particularly an issue when the purchaser acquires a portfolio of properties where there may not be adequate environmental information available for each property, there is no time to review the environmental information, or there are surrounding properties that may impact the purchased property for which there is no environmental information.

Real Estate Broker – Lawsuits against both buyer and seller brokers for non-disclosure of environmental issues including soil/groundwater contamination, vapor intrusion, historical meth lab activities, lead, asbestos, etc.

Mortgage Lender – The inability of a borrower to pay the loan back to the lender due to environmental issues with the property or a decrease in the collateral value of a property due to environmental concerns.

Contractors/Appraisers Performing Due Diligence on the Properties – Since most due diligence activities are not “intrusive”, i.e., they do not involve the sampling of soil or building components, environmental conditions may be discovered after the sale and contractors performing due diligence activities may be sued for non-disclosure of environmental issues including soil/groundwater contamination, vapor intrusion, historical meth lab activities, lead, asbestos, etc.

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