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Considerations before You Buy or Lease: Avoiding a Toxic Surprise

Lisa Finkelstein, Environmental Considerations in Natural Resource and Real Property Transactions (1988)

The obvious answer to the question: “How to avoid a toxic surprise?” is that sellers and buyers, or landlords and tenants, and their lenders, should conduct an environmental due diligence assessment prior to closing the transaction and then allocate potential risks and liabilities between or among themselves through various contractual arrangements.5

An environmental due diligence investigation (often referred to as an environmental audit or environmental site investigation),6 has two aspects: (1) an investigation of the historic and present uses of a site, often accompanied by on-site testing of surface and subsurface soils, groundwater, areas containing asbestos, and equipment containing polychlorinated biphenyls (“PCBs”); and (2) an analysis of the compliance of current operations with environmental permitting requirements, such as an NPDES permit for point source discharges under the Federal Water Pollution Control Act (the “Clean Water Act,” 33 U.S.C. §§ 1251-1376; id. § 1344), or an air emission permit under the Clean Air Act (42 U.S.C. § 7401, et seq.) regulating the release of fugitive dust emissions. If operations are to expand, change or recommence in their entirety, then the compliance review will analyze whether the new property owner can obtain the requisite permits to allow the company to develop and operate the facility in compliance with applicable re