Commercial Property Owners: Be Aware of Potential Environmental Liability

Laybourn-Nick-OPTBy Nicholas J. Laybourn

Special to Business in Savannah

Despite popular perception, high-hazard businesses like industrial sites and manufacturing facilities are not the only commercial properties that face environmental risks. Convenience stores, gas stations, hotels and resorts, shopping centers, and office complexes may also be at risk of environmental liabilities.

As government regulators have enacted increasingly stringent environmental regulations, commercial real estate owners are finding themselves vulnerable to greater environmental liability and related financial loss. It is important that business owners take a proactive approach to risk analysis and risk control when it comes to environmental concerns. Failure to comply with environmental regulations can result in substantial penalties levied by government regulators.

Property owners can also be vulnerable to lawsuits from surrounding property owners for environmental liability. In one national case, 160 families and businesses affected by a 2006 gasoline leak were awarded more than $1.5 billion in damages. However, judgments in other underground storage tank lawsuits have sided with the defendant property owner; having an experienced team in place can make the difference.

Before making an offer on a piece of commercial real estate, the buyer should ask the seller and his or her real estate representative if there are any known environmental problems on the property. Sellers and lessors of commercial real estate must be upfront about any environmental irregularities found in the property. Failure to disclose problems—and/or actively concealing them—can lead to litigation from the buyer. Also keep in mind that the buyer may be liable for cleanup costs even if he or she did not cause or contribute to the problem.

In addition, potential buyers should research past uses of the property and the surrounding properties to determine what types of businesses have operated at the site and in the area. Even small or home-based businesses can impact a property. Knowing the past history can provide clues to contaminants that may be present. An environmental site assessment can identify potential or existing contamination liabilities on both the underlying land and the physical improvements to the property.

Discuss potential environmental concerns with your commercial insurance broker to ensure you are appropriately protected with insurance coverage in the event of an environmental contamination claim. If you encounter environmental issues at your commercial property, immediately notify your commercial insurance carrier to confirm that your interests are being protected by an attorney experienced in handling environmental liability claims. Potential environmental issues do not need to be an obstacle to owning a commercial property if the issues are proactively identified and managed.