COVID-19 Update: How We Are Serving and Protecting Our Clients

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.

Client Reviews
★★★★★
Kristina Reed handled the legal work of creating a corporation for my photography business in the state of California. She was extremely professional to work with and very prompt in her response times. She explained everything in language I could understand and helped me navigate the process smoothly from start to finish. I was very happy with her services and will definitely return to her for any future needs! Amy W.
★★★★★
As the co-owner of a small business, the process of selling assets was overwhelming. It was great to have [Kristina Reed's] advice throughout every step of a very demanding and hectic process. We were very pleased with [Kristina Reed's] class, focus and approachability. [Kristina Reed] always acted as a valued associate to the company and became a reliable advisor. Furthermore, we thank [Kristina Reed] for [her] calm encouragement when it was most needed would recommend [her] expertise unequivocally. Todd S.
★★★★★
I reached out to Kristina to assist with drafting some contractual real estate paperwork, and was not disappointed. She provided a prompt response and was very helpful in accommodating my request. Her expertise ensured a thorough conclusion. I would gladly recommend Kristina to other individuals needing real estate expertise. Stephen R.
★★★★★
I'm extremely impressed with my experience with Kristina Reed. I used her services to negotiate a commercial lease in Folsom. Our agent had actually recommended a few attorneys to us but we didn't feel comfortable with any of them. I was very impressed with Kristina on our first conversation. The landlord group was one of the hardest you can find to deal with. There were lots of going back and forth but Kristina's knowledge and experience made my life very easy. She was always quick to get back to us whenever we have questions. She pointed out issues on my lease that my previous lawyer totally missed. I recommend Kristina's services to everyone I know. My friend just used Kristina's services for his lease negotiation in Davis and he was very impressed as well. Devin B.