What Should You Do When You Find Out Or Suspect Your Business Property Is Contaminated?

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Today, federal, state and even local agencies in New York enforce environmental laws and regulations designed to help keep the environment clean.  Companies find it makes good business sense to have sound environmental practices.  There is a culture of environmental awareness and recognition that we should be protective of the environment.

It wasn’t that long ago, however, that this wasn’t the case: many businesses didn’t see the value in being good stewards of the environment and engaged in less environmentally-sensitive practices.  As a result, in New York, with its legacy of industrial activity, many business properties are contaminated.  Often times, the contamination is decades old and the current landowner has no idea that the contamination exists.

There are many trigger events that lead to the discovery of contamination, or suspected contamination, on a property.  Some common ones are:

  • a prospective sale of a property
  • new development or renovation of a property
  • an environmental audit of the property
  • getting a mortgage on the property
  • the discovery of contamination on adjacent property.

In each of these instances, some event causes either an inspection of the property, such as the need for an environmental site assessment, or some physical activity on the property, such as construction, demolition or sampling.

So what should you do if you discover you might have contamination on your property?  Like many things in life, the answer is it depends.  If you discover an active, ongoing source of contamination, you almost certainly have a fairly immediate reporting obligation, either under a statute/regulation or an environmental permit.   If you uncover what looks like it could be historic contamination but are unsure, your response can be more measured.

If you discover or suspect you have discovered contamination on your property, here are some actions you should consider taking:

  • Contact your legal counsel to discuss your options. How you respond to the discovery of contamination or suspected contamination can lead to a major headache with significant expenses, if not done correctly.  You may spend some money on getting sound legal advice, but you could end up paying out more if go at it alone.
  • Find out your reporting obligations right away. Different situations can call for different reporting requirements.  Some reporting requirements require almost immediate reporting and the failure to report could result in a substantial civil penalty or even criminal charges.  Experienced counsel can help you understand what these obligations are.
  • Take a look at your insurance coverage. Environmental contamination often is excluded from coverage, but not always.  You should review your coverage, with your insurance broker or counsel if necessary, to determine whether your business may have coverage that can help pay for a clean-up.
  • Understand what your property documents say. If your business purchased the property, look at the purchase documents to see what they say about contamination.  Often times, especially in a more sophisticated transaction, risk of contamination is allocated in the transaction documents.  If your business leases the property, see what the lease says.  There may be a provision that discusses what happens if contamination is found.
  • Consider hiring an environmental consultant. For many reasons, you may want to know what you can about any contamination or suspected contamination you find.  For example, if you suspect the contamination came from a neighboring property, you probably want to determine its source so you can determine who may be responsible for remediation.  Be aware that you may have to act on issues your consultant uncovers.
  • Look into whether you can recover or demand cleanup costs from a responsible party. Often times, more than one party is responsible for contamination at a property.  Considering the fact that cleanups of these properties can be very expensive, even if your business shares some responsibility for a cleanup, you should consider whether other responsible parties should share these costs.  Talk with your counsel about your options if you suspect another party or other parties might be responsible for any contamination.

No business wants to find it has or may have contamination on its property.  If it happens, however, your goal should be to consider taking these steps to help minimize your risks.

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