Managing Facilities, Due Diligence and Facility Transfers
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assessments prior to real property transfers. Severe contamination can
not only result in excessive liability for responsible parties and
landowners, but also be a "deal breaker": if a site is severely
contaminated, a potential buyer may walk away from purchasing the
property. Lenders are also particularly leery of such properties. The
site could still be useful as a commercial property, however, even if
there are leaking USTs or the land has been contaminated through other
commercial activities, e.g., a bus yard where years of leaking fuel and
oil have contaminated the land (if such problems are not remediated, they
can, of course, lead to further troubles at a later date). In many of these
circumstances, a buyer may still be willing to purchase a contaminated
property if remediation of the property is a condition of the sale.
Many contractual options are available. Agreements between sellers
and purchasers can be structured so that the seller either performs
cleanup or reimburses the buyer for the cleanup costs. As with many
types of contractual arrangements, there are pitfalls. The type of
agreement chosen will depend on the buyer's and seller's respective
needs and their willingness to negotiate. For instance, if the seller takes
on the burden of cleaning the property, there may be a dispute over
"how clean is clean." Conversely, if the buyer agrees to remediate the
property conditional upon reimbursement from the seller, a dispute may
arise over remediation costs with the seller refusing to pay above a
certain level. A cap on remediation costs in the sales agreement will
prevent the buyer from forcing
the seller to restore the property to a
pristine condition if it is unnecessary under the circumstances.
Despite the now-routine site assessments conducted when commercial
properties are transferred, there are additional state requirements that
mandate either the performance of these assessments or the notification
of buyers that contamination exists. These types of state laws provide
added protection for buyers and place the burden on sellers to perform
site assessments and to be candid about the site's history. In states
without such statutes, the burden is on the buyer to ensure that the
property is clean before it is purchased. In either type of state, however,
both buyers and sellers may wish to get their own consultants to ensure
the accuracy and honesty of the assessments; the buyer wants to avoid
liabilities and the seller does not want to be saddled with unnecessary or
inflated cleanup costs.
The types of pretransfer statutes may vary from those that merely
require sellers to notify buyers of contamination (for example, the Illinois
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