Environmental Due Diligence

Environmental due diligence is both a combined legal and technical exercise that is performed to satisfy certain liability protections that may be available under federal and state environmental laws. Parties to transactions also perform environmental due diligence to develop information about environmental conditions so they can allocate liability and manage environmental risks. Environmental due diligence often begins with a phase 1 environmental site assessment that is performed in accordance with the ASTM E1527 Standard Practice for Environmental Site Assessments (ASTM Phase 1 Standard).

due-diligence-page-300x225 Environmental Due DiligenceUnfortunately, many clients often just focus on the “technical” piece of the due diligence process and do not engage environmental counsel to ensure that the report they are relying on adequately protects them from environmental liabilities. Clients frequently do not realize that the ASTM Phase 1 Standard is a performance-based standard that depends on the exercise of “professional judgment” by persons that qualify as “environmental professionals.” As a result, clients and their lenders frequently have the perception that phase 1 reports are essentially commodities which do not differ among the various environmental consulting firms so that clients only focus price and speed matter.

However, the quality of reports can vary considerably. Many phase 1 “mills” use inexperienced and part-time personnel to perform the site inspections who do not only qualify as “environmental professionals” but also are not adequately supervised by those who quality as “environmental professionals. In addition, the ASTM phase 1 focuses on identifying the presence of contamination resulting from hazardous substances and does not address other issues that may environmental conditions that could result in significant liability for property owners such as asbestos, lead-based paint and mold.

Phase 1 reports should be developed to fit the specific environmental risks associated with a particular transactions. These transaction-specific environmental issues are called Business Environmental Risk. We have developed a particular expertise in evaluating and tailoring environmental due diligence for the full range of business and real estate transactions. We have also chaired the ASTM legal sub-committee that advised the ASTM task forced that was responsible for developing the ASTM Phase 1 standard.

Because of our participation and leadership roles with a number of ASTM due diligence standards, we are able to offer our business, developer, lending and consultant clients particular insights about the requirements of these due diligence standards.

Our due diligence and transactional support services include:

  • Pre-Transactional Diligence- Strategic sellers are increasingly using pre-transactional diligence reviews to help flag issues that could complicate a transaction to maximize the value of the assets and expediate the closing of the transaction. We help clients identify existing and legacy liabilities associated with corporate assets and historic operations, resolve and develop pro-active strategies for those issues  to facilitate transactions.
  • Environmental Reviews– we help clients develop expeditious and cost-effective investigations that meet the needs of a fast-moving transaction and their particular risk tolerances ; evaluate and confirm environmental issues identified in phase 1 reports or recommendations in phase 2 reports; provide clients with practical and reasonable estimates that allow clients to better value their transactions, and review or negotiate contracts with environmental consultants;
  • Structuring Strategic Solutions- We assist clients structure their transactions and design creative cost-sharing or allocating mechanisms to try to minimize their potential liability; develop exit strategies for the environmental liabilities identified during the environmental due diligence process;
  • Brownfield and Other Financial Assistance Mechanisms– we have particular expertise in identifying and obtaining financial assistance for defraying some or all of the cleanup costs arising out of a particular transaction;
  • Contract Drafting and Negotiation– we assist in drafting environmental provisions in a full range of agreements including due diligence requests, purchase and sale agreements, environmental covenants and reps in loan and financing agreements, indemnities,  post-closing remediation and remediation agreements, access or license agreements to perform or implement investigations or remediation;
  • Post-Closing Services– We help clients implement, monitor and enforce post-closing obligations to investigate, remediate or monitor environmental issues;

Dry Cleaners: the scourge of commercial real estate

Visit our Resource page for helpful links about this topic >

Scroll to Top