Question

Discuss the liability of real estate professionals in regard to environmental issues. Find at least two articles or cases that address this issue and summarize each. Be sure to include your viewpoint on the subject.

Answer 1

Ans)

Environmental laws are complex, far-reaching, and of potentially tremendous significance in transactions involving real estate. To address the concerns associated with this complex body of law, real estate professionals should be familiar with the ways in which various environmental laws can affect both real estate and the parties to a real estate transaction. Provisions should be included in any commercial real estate transaction to identify pertinent environmental liabilities and restrictions on land use and to address those concerns in the structuring of the transaction and in the preparation of transaction documents. The risks, though significant, generally can be addressed.

The real estate industry is interested in reducing or eliminating its environmental risk and protecting the value of its properties and investments. The environmental consulting industry is interested in selling and performing professional services - from environmental site assessments (Phase I), to intrusive sampling and testing (Phase II), to remediation (Phase III) of recognized environmental conditions. The real estate industry cannot afford to abandon its statutorily recognized, standard-setting status to the environmental consulting industry. Rather, it must continue through the ASTM review process and otherwise, to foster the development of good customary or commercial environmental due diligence practices.Although the approaches to, and components of, environmental risk management may be viewed as susceptible to categorization and standardization, the purposes and uses of environmental risk management tools available to the real estate industry in the market place will continue to be as diverse and vaned as the needs and nsk-taking appetite of a particular investor. Obviously, real estate developers, owners, sellers, buyers, lessees and lenders, as well as brokers, property managers and business operators will have different perspectives with regard to the same issues m specific transactions. CERCLA liability aside, each party to a transaction will approach and use the information gathered in the due diligence process to fulfill its respective business agenda within the larger context of its business judgment regarding, and appetite for, risk. The same information will frame different issues to be weighed in the party's determination to acknowledge and avoid, allocate or accept a form of risk.

Allocation of Liabilities:
In particular where ongoing businesses are involved, but in other situations as well, it is useful to provide for an allocation of liabilities. Often these liabilities are divided, with the seller having responsibility for conditions existing prior to closing and the purchaser having responsibility for conditions arising after closing. A key issue relates to the placement of the burden of proof should a problem arise. The placement of the burden may determine who ends up responsible. In addition, a seller may want to have a cut-off
period so that if no liabilities are discovered within a certain time period,then regardless of the factual situation giving rise to those liabilities, the purchaser is liable if the time period has expired. Among the costs to be considered in allocating liabilities are costs of environmental compliance, remedial
costs, and toxic tort liability.

Counsel's Opinions:

From the perspective of the lender, the lessor, and the purchaser, it may be useful to have counsel for the other party opine that pertinent requirements have been satisfied. This opinion generally may track the representations and warranties made by counsel's client and should provide some additional degree of comfort.