What should businesses know when buying contaminated property?

February 28, 2014

Businesses are looking to expand as the economy recovers, and many will consider purchasing new property on which they will build new facilities. But as business owners seek out the best deals on properties that meet their location and size requirements, they need to keep in mind the possibility that the land they are interested in may actually be contaminated.

This is not uncommon. The Government Accountability Office estimates that there could be as many as 425,000 brownfields in the United States. These plots of land are defined as "abandoned, idled, or underused property where expansion or redevelopment is complicated by the presence or potential presence of contamination," according to the U.S. Department of Housing and Urban Development. Since these are often the sites of former factories and other industrial facilities, it makes sense that some companies may want to invest in them and bring them back to operational standards. They may be able to get a good deal on the land, and business owners may take some satisfaction in revitalizing a run-down area.

However, there are risks involved. First, there is the threat that the buyer may not be able to develop the property according to a pre-planned schedule due to the unforeseen difficulty of dealing with a contaminated site. Then there is the cost of cleanup, and the fact that the new owner could become liable for any continuing contamination emanating from the property.

When buying contaminated property, businesses must follow CERCLA guidelines

Under the U.S. Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), existing property owners must clean up their property, even if the contamination occurred years before they first bought it. However, some liability protection has been inserted into the law. For example, according to an article on Environmental Leader, owners can qualify for this protection if they make "all appropriate inquiries" into the property's history and prior ownership to determine when the contamination began and how the property was used.

This protection is limited. As the news source points out, the release of fuel from underground storage tanks is one instance in which new property owners would not be protected. In addition, it does not apply to any land that is part of a state cleanup claim or toxic tort action.

It is vital for organizations that currently own or are considering purchasing contaminated land to quickly assess the property and move to clean it up as soon as possible, while taking all of the necessary steps to protect themselves from liability. It is in their best interest to work with environmental consultants that can make sense of the pertinent regulations and establish best practices for managing liabilities. If everything is done properly, there is no reason why businesses cannot buy up old, polluted land and invest in its revitalization.