Q: Something caught me by surprise when I was buying a piece of business property: I was required to pay for an environmental audit that turned up residual contamination from a long-ago business on the site. My company in no way will contaminate the land, but I can’t open until the property is deemed acceptable. Is this right? And what are my options?
A: Unexpected problems add to the headaches of opening or relocating a business, and we hear a lot about the hang-ups of required, but annoying, environmental investigations.
However, an evaluation is necessary whenever a lender is financing real estate to make sure the property is environmentally clean and will not cause more damage to the environment in the future.
There are plenty of stories about private and public projects that have little or no impact on the environment—such as florist shops or libraries—being delayed or stopped by old environmental contamination.
You might ask the reasons environmental regulations exist and apply to you. After all, your business is not one with the obvious potential environmental impact of, say, a dry cleaner or service station. But lenders, including the Small Business Administration, must guard against being responsible for remediation costs in the future. Decades-old pollution can cause problems years after the offending business is gone from the site.
Environmental regulations are fairly explicit. Most commercial lenders and the SBA have a set of requirements the borrower/business owner must meet. If you are financing property, meet with your lender. Then, locate a licensed and insured environmental investigator to lead you through the process.
It may not seem fair for you, as the current owner of a commercial location, to be saddled with remediation costs from 30 or 40 years ago. But the outcome of a successful investigation and remediation will be worth your respect and your attention.
Wojtowicz is president of Cambridge Capital Management Corp.