Purchasing a commercial property can be a very stressful transaction. The idea and action of actually making this large purchase can invoke strong feelings of anxiety due to the fear of making mistakes in the transaction and the large impact on a bank account. While the purchasing of this corporate building seems simple on paper, there are various factors that need to be taken into consideration before the sale can go through. Once an offer has been made, it is important to review different items associated with the stability of the property, such as the environmental report. This article will discuss environmental reports, what they are and why they are important.
When making an offer for a building purchase, it is vital that the property is environmentally sound. Yes, the property may seem eco-friendly and environmentally clean, but is it truly in this state of being? What if it is all a facade and what seems to be an eco-friendly site is actually a hazardous piece of contaminated land? How does a person progress from this point onwards? It is at this point that the environmental report becomes highly significant. In fact, there are numerous critical reasons as to why a comprehensive environmental report should be conducted, not the least of which is the issue that all lenders are obliged to mandate such a document.
To complicate matters, the seller of the property may have contrary goals for the property and will not enjoy you “snooping about”. This is why environmental reports MUST be completed accurately and effectively in accordance with current environmental laws. The failure to do such a thing will result in one facing financial costs to care for the property above and beyond the actual purchase price. So, once you are making an offer it is important to negotiate the contract of the sale to ensure you have the right to complete a Phase 1 inspection for environmental conflicts, along with additional rights to complete a Phase 2 inspection if Phase 1 is positive in any way.
The first priority after signing a contract for sale is to hire a reputable environmental law firm to conduct the Phase 1 inspection on the purchased building. This Phase 1 report involves researching of the historical uses of the building; as well as, a walk-through of the potential building site as part of a visual inspection. Trained, professional and certified environmental engineers will be able to determine whether or not the property is environmentally sound by searching for discoloured concrete, patches of new concrete or asphalt that look out of place or indicative of removal of underground tanks. The professionals will also be searching for additional environmental concerns, such as drums that could be a health hazard. All these factors will be entered in environmental reports.
The Phase 2 report can result in further issues for the seller as some sellers may not be aware of hazardous non-environmentally friendly property issues. Once the problem has been identified, the seller has an obligation to remedy the issue at hand. A potential solution for the problem is to contact an attorney with an environmental engineer to remove the necessity to report findings in a confidential setting between seller and buyer.