Awareness of environmental issues is a crucial aspect of any real estate transaction. The reason being, failure to address these issues can lead to unforeseen financial liability for all parties involved. But if a property of interest is known to have problems of contamination, accountability can be set out in the appropriate contractual agreements prior to any exchange. The buyer and seller can allocate the liability of both acknowledged and potential environmental concerns, but an assessment is needed in order to figure out exactly what those concerns are.
The question of land contamination is often the primary focus of investigations done by investors. When it is discovered that land itself is polluted, the source of the problem must then be determined. It is possible the pollutants have come from off site and are not the result of current owner activity. The specific liabilities for a site owner depend on the context of contamination, so knowledge of its source and level of culpability can help to quantify risk and responsibility.
Mold is another major area of concern for property owners and investors. While the problem itself is usually due to improper building ventilation, there is the issue of different environments breeding different mold. Although every kind of mold will eventually cause physical damage to a structure, some types are extremely toxic to humans as well. The medical conditions caused by exposure to harmful mold can leave landlords exposed to sizable personal injury lawsuits.
Thankfully for those involved in real estate it is possible to avoid the financial pitfalls associated with environmental disasters. The first thing that can be done is called a Phase I, which is an environmental background check for a property. But a Phase I does not require any testing, it is only a review of accessible information to determine whether environmental issues exist on record. An environmental consultant should also be retained to establish if any new problems have arisen since a property’s last assessment.
Nobody likes surprises in real estate. Obtaining reliable information about a property is the only possible way to foresee and manage any issues. There are also various types of environmental insurance available to help mediate costs and liability. But in the end, understanding the implications of the knowledge at hand is the best means by which to minimize risk and maximize reward.