Real Estate Transactions and Business sales transaction generally view environmental due diligence for potential purchasers generally view environmental due diligence sufficient if a Phase I toxic environmental assessment is completed with a “clean” result or with minor clean-up to be completed.
Depending upon the prior uses of the real property or the type of business being purchased, additional due diligence is a must because of a potential federal environmental liability under the federal statute, the Comprehensive Environmental Response, Compensation and Liability Act (DERCLA), 42 U.S.C. sections 9601 et seq. (“CERCLA”) and its related regulations and amendments. The environmental due diligence on a real property transaction and/or business transaction may show no hazardous substance containmenation but if you buy the property and/or business you may still be a “potentially responsible party” (“PRP”).
When any site is containmenated with hazardous substance, there are four classes of liable parties: (i) owners/operators of a disposal site, (ii) owners/operators of the disposal site at time hazardous materials were placed at the site, (iii) generators of hazardous substances, and (iv) transporters of hazardous materials.
For example, you may own real property and lease it to a printing company, auto repair shop, etc. The business located on the real property properly packages the hazardous material and hires a transport company. The transport coompany then deposits the hazardous waste with a reputable disposal company and site. The disposal site becomes contaminated. Who is responsible for the clean up expenses and costs? Potentially everyone along the chain of real property ownership and operators who leased the property to the business/lessee ownership and operators, the transport company and the owner and operator of the disposal site.
The information provided here is very simple but designed to encourage thoughtfulness regarding environmental due diligence before you buy or lease real property or a business. In addition to numerous federal statutes and regulations, there are applicable California statutes and regulations.