When a Home Poses an Environmental Risk

May 29, 2014

Real estate professionals often must evaluate environmental risks associated with property deals. Identifying, assessing, and minimizing such risks has become more complicated in light of several recent developments: most notably, changes to risk evaluation standards; a renewed regulatory emphasis on environmental compliance and enforcement; and a spate of transactions stemming from the recession. 

In real estate terms, "environmental risks" refers most often to risks stemming from environmental conditions of a property. However, the definition also may refer to risks based on regulatory programs concerning a property or resource limitations. 

In general, every property should be evaluated for potential soil, groundwater, and vapor contamination. Usually, a Phase I Environmental Site Assessment or Transaction Screen will suffice for this purpose. 

Depending on the property, however, a more comprehensive evaluation may be needed to assess other potential risks — including asbestos contamination, mold, wetlands, water resources, endangered species, and more — that can trigger liabilities.

Source: "Evaluating Environmental Risks in Real Estate Transactions," National Law Review (May 29, 2014)

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