Due Diligence: Knowing Your Environmental Liability in a Property Deal

If you are party to a merger and acquisition or other property deal, don’t count out the danger of environmental liability. Inadvertently taking on a property that is riddled with environmental liabilities can cost you big time. The risk mitigation experts at AADS can help.

All too often, buyers fail to perform their due diligence and are faced with unpleasant surprises. Under federal law, buyers can be held jointly or even entirely liable for damages, cleanup costs and the like when acquiring contaminated properties. In fact, they can even be held liable for the release of hazardous substances even if they were released long before the property transaction occurred.

Quantifying Environmental Liability

Given that the Environmental Protection Agency, or EPA, performed enforcement actions totaling more than $404 million in 2015 alone and that court-ordered environmental cleanup projects totaled more than $4 billion that same year, it is plain to see that environmental liability is a serious matter–and one that many parties to such deals fail to take seriously enough. Consider this: The average cost to clean up a contaminated site is around $26 million. Could your company or other business venture survive that? Even if so, would you want to be out that kind of money? Performing due diligence regarding potential environmental liabilities is therefore well worth it.

Due Diligence Questions to Ask

It is important to put as many tools to work as possible when performing due diligence under these circumstances. Come up with a detailed list of due diligence questions to pose to the other party, and get their answers in writing. Ask the other party to provide any documentation that they can to demonstrate that the property is environmentally sound. Most importantly of all, have an extensive public records search performed to ensure that something isn’t still lurking out there that the seller is either hiding or is completely unaware of for whatever reason.

A lot is at stake in mergers and acquisitions and other property deals. Failure to properly investigate the matter can result in serious problems that can jeopardize your financial future. Make sure to seek help from qualified professionals so that you can move forward with confidence.

Why Partner with All American Document Services?

All American Document Services provides search and abstraction of a wide range of documents essential to the real estate, legal, corporate, and transaction processing industries. If you are concerned about environmental liability, look no further than AADS. Our accurate background checks, abstracts, and filings have helped to clarify legal and financial risk for thousands of companies and individuals since 2002.