The Overlooked Importance of Fresh Environmental Diligence

By: Michael Polentz

The federal Comprehensive Environmental Response Compensation & Liability Act and its state analogues generally take a very expansive view of liability for environmental contamination and include owners and operators (e.g., lessees) as potentially liable parties without regard to whether such parties actually caused the underlying contamination. Furthermore, because CERCLA liability is joint and several, such an owner or operator can find itself responsible for the entire cost of cleanup (including certain associated legal fees).

Although lenders are, in most circumstances, protected from direct liability in connection with environmental conditions at a collateral property, lenders are not fully insulated from the effects of environmental contamination of collateral property. Indeed, due to the presence of unexpected environmental conditions at the subject property, (1) the contaminated property’s value as collateral may be impaired, (2) the contamination and costs associated therewith may impair the borrower’s ability to repay the loan, and (3) if the environmental conditions are severe enough, the lender may suffer reputational consequences.

Read the article here



pursuant to New York DR 2-101(f)

© 2022 Manatt, Phelps & Phillips, LLP.

All rights reserved