When you contract for the sale of an industrial building or land, the purchaser or bank will most likely want to conduct an environmental audit of the property to determine if any environmental liabilities exist. Regardless of who actually may have caused any contamination of the property, if environmental harm is found on the property or the property is found to be the cause of harm to adjacent properties, the current owner will be liable for the cleanup. Therefore, when purchasing an old property, the new owners will usually want to determine its environmental condition.

Old industrial properties located in areas called “brownfields” are most likely to have been environmentally contaminated over many years of use, particularly if that use extends over a century or more. That was the case with a property I was selling in upstate New York along what used to be the old Erie Canal.

In fact, the property was located on Erie Boulevard in Syracuse. The sale of the property was part of the sale of a company and was an integral part of paying off the bank loan. The purchaser of the property was going to convert the old industrial building to a new auto-parts warehouse. The land had been part of the industrialization along the old canal for over 150 years.

The buyer wanted to conduct an environmental audit of the land as part of his due diligence. The company conducting the audit was drilling core samples on the property when one of my older employees informed me they were now about to drill in an area where he was sure there was an old abandoned oil tank which had never been removed. The new buyer was also present at the time.

When I received this information, I went to the buyer and informed him he was about to lose the opportunity to buy this property at the bargain price he had contracted for. The discovery of the oil tank would immediately halt the sale and require monitoring of the surrounding land for any additional spills from this tank. Then there would be the enormous cost of the “cleanup” of property that had been contaminated for over 100 years of industrial use. What else would they find?

A few minutes of discussion ended the environmental audit. The buyer had his building and the site for his new warehouse without further hassle. Up until this time no harm had ever been attributed to the property, and certainly no additional harm would come from the sale. All the surrounding properties were industrial use as well. An environmental crisis averted. What would you have done if you were the buyer? The seller?