95    THE ENGINEER'S ROLE IN COMPLETING
ENVIRONMENTAL AUDITS FOR INDUSTRIAL
PROPERTY TRANSFERS
James D. Edwards, Director
Industrial Services Division
Burgess & Niple, Limited
Columbus, Ohio 43220
BACKGROUND
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and
"Superfund" have made Buyers and Lenders wary of real estate transactions. Recent court decisions
have shifted cleanup costs to the Buyer whether or not he was responsible for the contamination.
Likewise, Lenders are being held responsible if the property returns to them due to foreclosure.
CERCLA provides for a defense against this liability if the Buyer makes "at the time of acquisition, all
appropriate inquiry into the previous ownership and uses of property consistent with good commercial or customary practice in an effort to minimize liability."
An Environmental Audit is intended to be such an inquiry. It is designed to determine the probable
state of compliance with existing environmental regulations at the time of the transaction, and to
identify the major environmental risks associated with the transaction. An Audit may contain cost
estimates for remediation, and may lead to further engineering inquiries including subsurface investigations, sampling programs, and laboratory analyses. Sufficient data should be presented to allow the
Buyer, Seller, and Lender to make sound decisions about whether or not to proceed with the
transaction.
All parties in a real estate transaction have a vested interest in a professional audit prior to
completing the transaction:
The Buyer seeks to determine if there are environmental risks due to current or past operations at
the site, and the probable remediation costs.
The Seller seeks to minimize his liability for past acts and to avoid liability for the acts of a future
owner.
The Lender seeks to minimize his responsibility for cleanup at facilities he holds as collateral.
REGULATORY HISTORY
The legal basis for Environmental Audits arises out of: 1) Traditional tort theories of nuisance,
negligence, and abnormally dangerous activities; and 2) Environmental Regulations including the
Resource Conservation and Recovery Act (RCRA) of 1976 and Amendments of 1982, Sections 104,
106, and 107 of CERCLA, and Sections 101 and 107 of the Superfund Amendments and Reauthorization Act (SARA) of 1986.
"Superlien Statutes have been passed by Arkansas, Massachusetts, New Hampshire, Tennessee, and
New Jersey. Ohio has discussed enacting these statutes which affect Real Estate Transfer and Lender
Liability.
"Real Estate Transfer requirements have been passed by Connecticut, New Jersey, and Pennsylvania and generally provide for prenotification of industrial establishment transfer, negative declaration
concerning discharge of hazardous substances, and declarations in the deed as to use of a site as a
hazardous waste disposal area.
"The Scope of Liability includes Strict Joint and Several liability which extends to former Owners
and Lessees (New York vs. Shore Realty Company). Lenders are affected in that a Mortgagee who
takes title pursuant to a foreclosure may be liable for cleanup costs for preforeclosure contamination
of property (U.S. vs. Maryland National Bank <S Trust Company). Lenders who become actively
44th Purdue Industrial Waste Conference Proceedings, © 1990 Lewis Publishers, Inc., Chelsea, Michigan 48118.
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