Business / Environmental Issues In Real Estat
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Autor: anton 11 July 2011
Words: 2146 | Pages: 9
nvironmental issues are a major concern in the status quo especially as land is becoming more limited and businesses are redeveloping on used land. These concerns arise in all types of real estate transactions; from the individual residences to large commercial facilities. Although the financial risks involved in these transactions are manageable, if environmental issues are not properly identified and mangaged prior to the property transaction, the owner may unknowingly assume substantial property liabilities in the longrun. Environmental issues can occur within the property site as well as from other parties. These concerns include land contamination, mold, asbestos and even cases of radon.
One of the biggest environmental concerns is land contamination. Land contamination includes pollution caused by human activities such as inappropriate trash disposal. However, the vast majority of land contamination is a result of industries dumping a variety of chemicals into soil or water. For example, the chemicals in soil may affect plants grown on the land and chemical releases to water may make the water unsuitable for drinking or used in industry production. This issue receives a large amount of attention in any real estate transaction because contamination may result from that specific site or from the flows of other sites. Locating the source of such land contamination is imperative because it results in the extent of liabilities for the site owners. If the contamination results from outside sources and other facilities, then the site owner bears a lesser liability as oppose to land contamination originating directly from the site. Additionally, identifying the source enables appropriate allocation of responsibilities in order to refurbish the site. Land contamination assessment is particularly important in areas near drinking water supply wells or individual residences. For this reason, land contamination is one of the most hazardous problems involved with real estate transaction.
Mold contamination has also become an increasing concern in real estate transactions. Mold contamination generally arises in buildings that have been poorly constructed or lack adequate ventilation. Molds can form in air circulation systems as well as inside of walls. If there is moisture, these molds can severely damage the building structure. In addition to that, molds can be extremely toxic to our health. There are certain molds that can cause serious medical conditions and several-high profile lawsuits have been won in favor of repairing personal injuries to those harmed by molds. The most common response to mold exposure is allergy. These allergic reactions may vary from mild skin irritation to severe respiratory damages depending on whether a person is atopic or not. Additionally, odors produced by the molds may also affect individuals. Due to the recent spurs of mold contamination, insurance companies have paid close attention to any possibilities of mold formation due to its ability to dengerate the property as well as cause personal injuries.
Under current environmental regulations, the "owner" and "operator" of contaminated property are subject to "narrow defenses." That means in most cases, the owners are liable to the government for clean-up costs even if the conditions were caused by another property or former owner. However, in some cases the government may choose to divide the costs between parties depending on how strong a defense stands.
Another environmental issue facing old properties is the presence of asbestos. Asbestos is less common than mold contamination and land contamination because it usually develops in commericial and industrial buldings. It originates from an insulating material in pipes and boiler rooms, in flooring and in roof shingles. Even though it is more of a problem for industrial and commercial buildings, it may also exist in many old residential properties. Once asbestos occur, the price to elimate it can be extremely pricy. Therefore, it is crucial to ensure that any potential asbestos problems are identified and the liability for dealing with these problems is allocated properly prior to the closing of any real estate properties.
One type of environmental issue which effects real estate properties that deserves special attention is the presence of radon. Radon is a potential contaminant that has been discovered later than most environmental issues. Due to its colorless and odorless nature, it is difficult to track the presence of this dangerous radioactive gas. Radon can enter structures through the water and the air, which means it is more of a concern for buildings located near a body of water. Over the years, it has become increasingly common in residential real estate transactions to have the air and water tested for the presence of radon. A unique feature about radon contamination is that there is no uniform standards of governing the "safe" level of radon in the environment, there are only some guidelines that may be useful for evaluating the extent of the problem. This is due to the fact that radon, to an extent, has not been fully researched. In most cases, before a closing of a property, there will be sampling in order to confirm the presence or absence of radon.
In many old residential properties, lead painting is a major environmental concern. Lead painting is extremely dangerous both inside the property as well as outside the property. Young children are especially susceptible to lead- related injuries within the resident because they are prone to ingest lead paint chips that fall off the walls. Moreover, if lead painting exists on the outside of the house, it can potentially contaminate the soil around the property. This problem becomes especially important for those who wishes to plant vegetables in their gardens, for they are ultimately consuming a deathly substance.
These environmental issues can exist in any type of site. However, the most dangerous site is one of a former gasoline station, which can have petroleum in the underground soil and underwater from leakage associated with underground tanks. Additinally, the oil, solvents from cleaning of engines, metals and acids can also greatly affect the soil in that environment. There are other types of sites that may have these harmful underground tanks as well. These sites include airports, farms, trucking companies, vehicle repair, dry cleaners, etc.
There are numerous tools that can be used to manage all the environmental problems discussed above. However, before any of these problems can be solved, it is important to identify all potential risks. In order to make accurate judgements regarding the evironmental issues that surround the property, an environmental consultant is typically hired to do the standard assesments. These basic environmental assessments have become a standard component of most real estate transactions. Along with an environmental consultant is an environmental attorney who oversees all the necessary documentations and legalities in order to identify any substantial problems. Ultimately, the purpose for acquiring these basic environmental issues is to obtain realiable information in order to accurately and effeciently manage the problems. Through understanding the implications of these environmental issues, tenants, owners, builders can better implement prodecures prior to transactions.
It is important as a purchaser to plan and review any environmental transactions prior to closing. By doing so, the purchaser protects himself/herself from environmental liabilities and compliance issues. There are two major liabilities that may occur if a purchaser fails to take adequate pecaution. First, there is a risk of having to solely pay for costs after a transaction because you have now become responsible for the site. Additionally, if the site interfers with other businesses or third parties on or off the site, the owner would most likely have to bear all the consequences. Another risk is a "compliance" risk, which involves acquiring permits or licenses to operate on land with special circumstances such as wetlands. In order to better assess risks involved in a site, there are four basic steps in the investigation prior to closing. First, there is a transactional screening in which a potential purchaser will list all the necessary information that will be needed in order to evaluate the property prior to acquisition. In 1993, the American Society for Testing an Materials (ASTM) developed a national standard to use as a guideline for addressing the possibility of environmental site issues. However, many purchasers in the status quo have successfully used their own independent research as an evaluation tool. Currently, anyone can collect information regarding certain sites through agency records and from the internet. Nonetheless, this effort should still be coordinated by a trained person, who has an overall understanding of the issues at hand. After a transactional screening takes place, an environmental site assessment would usually follow if there are problems regarding the property. At this stage, an environmental consultant would be needed to address these concerns more specifically. A purchaser in this case will again provide a list of all required terms for the consultant to follow. These guidelines and terms can also be found under the ASTM standard known as "Phase I: Environmental Site Assessment Process." These guidelines set the fundamentals for review, however many purchasers will modify it in order to better suit their needs for completeness. Depending on the results of Phase I evaluation, additional site investigation may be needed to clearly identify particular problems of the site. A qualified professional would usually represent the purchaser's interest. When all site evaluations have been completed, the owner would have to assess remediation costs. Two possibilities are at hand in this final stage. First, the potential purchaser can decide that the remediation costs are too high and can no longer invest in the property. Or if there is adequate resources and the risks aren't too high, they will proceed to find solutions to these environmental issues.
There are many common mistakes that purchasers make regarding environmental site investigations. First, the buyer assumes that since the land has been vacant, there are no risks involved. This assumption fails due to the fact that vacant land may have once held an operation with significant environmental damages. Another common mistake made is using and trusting the former owner's site evaluations. The former owner may not fully understand or even remember what the issues were in the beginning, thus it can mislead the buyer. Additionally, it is important to select a credible and reliable consultant. Many buyers make the mistake of using the seller's consultant, who may not work in the buyer's best interest. Morever, using an inexperienced or bad consultant may prove to be determintal. The inexperience consultant may fail to properly address all the site's issues, or cannot think "outside the box," thus causing the buyer to face major cleanup costs in the long run. Therefore, within any real estate contract, it is imperative to indicate enough time for environmental assessments. Failure to include environmental factors in contracts could endanger the deal at hand and make acquisition more costly than predicted.
Given all the risk, time and costs involved regarding environmental issues in any real estate transaction, there are actually a few remedies to help the buyer. An experience attorney maybe able to allocate the liabilities in contracts in order to provide the buyer with more flexibility to manage the risks. Additionally, there has been an increasing trend in the availability of environmental insurance. These insurance companies would insure the owner agianst any unknown risks and provide coverage for those on the site after closing. Moreover, there are a number of state and federal programs that encourage the development on sites which have been out of commerce. These programs offer advice regarding how to best address contaminated sitse and they also offer grants, tax benefits and reduced costs.
Environmental risks exists in many real estate properties. Sometimes we can clearly see the concerns, and at other times, we must predict the possibilities. If these environmental issues are left unattested, it may not only cause major financial risks, but also be detrimental to the health of those within or around the area. Therefore, present laws and regulations place a heavy penalty on misjudging the risk of a particular property. Most businesses address these environmental concerns through a structured procedure that can properly document all the necessary information. For individual residents, it is best to hire an environmental consultant prior to purchasing any property. Once the environmental issues have been addressed, there are many options that the potential buyer have in order to manage the risks. While some transactions fail due to these environmental concerns, others are able to move forward and address the issues at hand. However, if the purchaser chooses to buy the property, it is imperative that these issues are managed for their own well-being and for third parties around them.
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