Historically, just the hint of environmental issues killed a commercial or industrial real estate transaction. Buyers would ask "who needs this?" when more expensive, but hassle free cleaner alternatives were available. But times have really changed, especially in the last two years.

One New Jersey city is actually purchasing a Superfund site! A major hamburger franchise seeks out polluted corner gas stations for new stores and a regional paint retailer searches for former contaminated automobile dealerships as new locations. Are they all certifiably insane? Hardly. They understand that some polluted properties can be great deals. Here is why ...

• Cost.
  These properties are generally much cheaper. For example, that New Jersey City is buying the Superfund site for approximately $3,000.00/acre. Immediately adjacent clean property sold for $15,000.00/ acre.

• Lender Participation.
  With the passage of the Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996, lenders are more willing to lend money on polluted properties. The new federal law protects lenders from liability in instances where they hold[] indicia of ownership primarily to protect their security interests in the ... facility without participating in the facility's management.

• Regulatory programs.
  The EPA and most States now have special initiatives aimed at promoting the sale of environmentally challenged properties. Such laws typically limit purchaser liability, reduce cleanup levels, and offer various other incentives. Some programs even offer loan/grant incentives.

• Voluntary cleanup programs.
  Many States permit cleanups through voluntary cleanup programs. This means that applicants approach the agencies with cleanup strategies, which are either approved, modified or rejected by the government. States are reporting universal success with these programs.

• New Environmental Insurance Policies.
  A major reason for the increase in contaminated property sales and development is the emergence of environmental insurance policies from national insurers. In the last five years, national insurance carriers have begun to write policies which are specifically designed to cover specified pollution events. One policy, called stop-gap coverage, applies if cleanup costs are higher than anticipated.

• EPA Guidance Documents.
  Finally, recently issued EPA guidance documents provide purchasers with the EPA's most recent position on significant issues touching on polluted property purchases. These areas include:
  
  1. cleanup remedy section criteria;
     
  2. responsibility of owners of property containing contaminated groundwater;
     
  3. guidance on prospective purchaser agreements that limit liability of new owners;
     
  4. comfort letter policies; and
     
  5. guidance concerning enforcement against lenders and government entities that involuntarily acquire contaminated property.
     

The information provided in this column is written by Stuart Lieberman,a practicing environmental attorney, and is for general information purposes only. It is not legal advice and should not be used in place of legal advice.

Stuart Lieberman, Esq., and IRED.Com, Inc., will not accept any responsibilty for any reliance on the information in this column or any damages whatsoever resulting from reading this column.