The role of an environmental assessment in commercial real estate matters

On Behalf of | Dec 28, 2023 | Real Estate Law

In many commercial real estate matters, an environmental assessment is critical to the overall decision-making process. This assessment evaluates the environmental risks and liabilities associated with a property.

An environmental assessment helps investors, lenders and owners understand the ecological conditions of a piece of real estate and the potential impacts these conditions could have on the value and usability of the property.  Once you become the owner or tenant of a property, you may become responsible for its environmental condition, even if you didn’t cause it.  Here are some points that are important to know if you’re dealing with environmental assessments for any number of reasons.

Identifying contamination or hazardous materials

An environmental assessment is essential for identifying potential contamination or hazardous materials on the site. This includes asbestos, lead, radon or other hazardous waste, which can lead to costly remediation efforts. Discovering such issues early in any particular process allows for informed decision-making, potentially saving investors and owners from unexpected expenses and legal complications.

These assessments aren’t just about identifying current issues but also about understanding the historical uses of the property. Past industrial or commercial activities might have left behind a legacy of contamination that could be unknown to current or prospective owners. An environmental assessment helps unearth such historical concerns, allowing for a more comprehensive evaluation of the property’s condition and value.

Regulatory compliance points

Another critical concern is compliance with environmental regulations. Various laws and regulations govern the use and development of commercial properties, including those related to environmental protection. An environmental assessment lends assurance that the property complies with these regulations, reducing the risk of legal penalties, fines or forced remediation activities imposed by environmental authorities.

Information about financial considerations

The role of environmental assessment extends to financial concerns as well. Environmental issues can significantly impact the value of a property. Contamination or non-compliance with environmental standards can lead to decreased property values and increased insurance costs, or even render a property unsellable or unfinanceable.

Lenders often require environmental assessments to manage risk before financing commercial real estate transactions. Understanding what this entails for a specific property and determining how to manage the results of the report are critical concerns in virtually any major commercial real estate transaction. Reach out to the attorneys at Max L. Lieberman & Associates, P.C. at 610-936-6612 for assistance regarding an environmental assessment.