Due Diligence Tip #31

Don’t assume that because your consultant has an elaborate environmental insurance policy with high limits that if you make a claim their underwriter will willy-nilly overnight you a check. Their risk department and an environmental attorney to evaluate your claim and render a calculated risk decision. You may be forced to litigate your claim and settle for a fraction of your loss. The tip here is to contract a competent environmental professional (EP) to perform your environmental site assessments.

Due Diligence Tip #30

Although sometimes testing is unavoidable, some environmental professionals may seem quick to recommend a Phase II Environmental Site Assessment. Ask your environmental professional  (EP) if there is any way to “dig a little deeper” to resolve an outstanding environmental concern. Have all avenues to resolve the outstanding concern been exhausted? Have the municipal and regulatory files been thoroughly reviewed? Were past owners, operators, and relevant municipal officials interviewed?

Due Diligence Tip #29

Environmental consultants’ number one mistake is careless or negligent work. The number one mistake made by users of Phase I Environmental Site Assessments is failing to read the entire report. Ask your consultant for a verbal report as well as the written. Verbal reports often convey a better understanding of discovered recognized environmental conditions (RECs) than the terse technical language contained in environmental reports.

Due Diligence Tip #28

Certain property types and uses are “red flags” for environmental liability. The short list includes industrial or manufacturing properties, waste disposal, handling, or treatment facilities, gasoline stations, dry cleaners, and any property occupied as a residence, childcare center, or school, and any property served by an on-lot well (toxic tort liability). Carefully review your Phase I Environmental Site Assessment report when any “red flag” concerns are discovered.

Due Diligence Tip #27

Be wary of “environmental professionals” who are willing to perform a Phase I Environmental Site Assessment for less than the fee typical for your area. A “low-ball” fee is a likely warning sign that you may not receive quality work. Competent environmental professionals  charge fees needed to cover their expenses to perform a thorough job on your project. You’ll thank yourself later for contracting the best firm available…not the cheapest.

Due Diligence Tip #26

Phase I Environmental Site Assessments have many names. Environmental Audits, Phase I ESAs, Environmental Site Checks, ESAs, All Appropriate Inquiry, AAI, and others. Ultimately, they all mean approximately the same thing. Perform your environmental due diligence to prevent unnecessary environmental liability.

Due Diligence Tip #25

As part of the Phase I ESA, have your environmental professional request of the seller a list of environmental documents and all related information. The request may include current environmental permits, compliance reports, government notices and violations, prior environmental reports, a description of response actions and remediation projects, a description of claims by any government agency or third parties, contingent liabilities, and the company’s environmental reserves.

Due Diligence Tip #24

Many commercial lenders have requirements for environmental due diligence that must be met before they will authorize financing for a transaction.  For example, some lenders require borrowers to use an environmental professional pre-approved by the lender.  Check with your lender before contracting a Phase I Environmental Site Assessment or any environmental work.

Due Diligence Tip #23

The old adage is “don’t judge a book by its cover.” Do not judge the environmental condition of any property based on its present curb appeal. Many properties that appear attractive today hide gross environmental contamination from historical industrial uses. It’s not unusual to find a shopping center, mall, or like commercial property today where an industrial plant was located in the early-1900s. Buyer beware.

Due Diligence Tip #22

Begin your environmental due diligence process early! Initiating your due diligence as early as possible will provide enough time to conduct a Phase II Environmental Site Assessment (ESA) if one appears necessary. Your environmental professional will need time to schedule drilling and testing contractors, environmental laboratories, and obtaining any necessary permits.