Environmental Claims Have Huge Impacts on Commercial Real Estate

December 13, 2015

Purchasing commercial real estate for a start-up business is one of the most exciting steps an entrepreneur takes toward achieving his or her goals. While this stage of the process can certainly be a rush of emotion, it is critical that buyers consider potential roadblocks. One of the most critical components to buying real estate, and especially commercial real estate, is ensuring that the property does not have an environmental claim. It is important for buyers to understand what environmental claims are and how they impact the value of a property.

What are Environmental Claims?

There is a broad scope of potential environmental claims that can range in severity. It is important for people to realize that although a building may appear to be in good condition, environmental impacts may not be readily visible and could have occurred many years ago. In fact, sellers may not even be aware that their building is in violation of environmental laws. Some of the most common environmental claims buyers encounter are:

  • Contamination from hazardous material leaks
  • Improper storage of chemicals, pesticides, petroleum or other high-risk substances
  • Asbestos and/or lead paint in older buildings
  • Air contamination
  • Water pollution
  • Above or below ground soil contamination

This is not a comprehensive list of environmental risks and such risks can be extensive or minor depending on the issue and how long it has gone untreated. There are a number of causes for air, water, or soil contamination and they may only be discovered by conducting specific tests.

Costs Associated with Environmental Claims

There are a number of costs associated with environmental claims on a property, especially commercial property that has regular public traffic. The expenses can add up including:

  • Legal defense costs
  • Clean-up fees
  • Profit loss associated with business shut-down during clean-up
  • Dramatic reduction in property appraisal
  • Permanent shutdown of business

These costs can greatly impact the budget of any business and especially the funds of a brand new start-up. Many businesses are not prepared for such costs and they potentially end a business before it even starts.

How to Avoid Purchasing Property with Environmental Claims

Real estate that is associated with environmental issues definitely suffers a loss in appeal and value. This is a cost that most startups simply can not afford. In order to avoid getting caught in the tangled web of environmental claims, it is best to avoid the situation at all costs by following these tips:

  • Have a thorough inspection completed of the property
  • Ask the seller direct questions about the history of environmental issues
  • Inquire about environmental risk strategies that the seller may have in place

Seek Advice from a Knowledgeable Attorney

Understanding environmental claims for commercial property can be confusing. If you are looking for more information please call real estate attorney Kristina Reed located in Sacramento, California. Her insight is multi-faceted as she has a strong grasp of the laws associated with environmental claims from the perspective of both buyers and sellers. Whether you need advice after unknowingly purchase a building with environmental claims or would like to know how to combat environmental claims in your existing business, she can help you through the process.

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