Three things can happen during a buyer’s due diligence process, only one of which is good: (1) The deal gets canceled; (2) Potential environmental issues are identified and the buyer wishes to re-negotiate the terms of the deal, or; (3) The deal goes through as planned.

By eliminating red flags in the buyer’s due diligence process, property sellers can reduce delays, lessen the opportunity for re-negotiation, and get more favorable offers.

My firm has conducted environmental due diligence at thousands of commercial and industrial properties.  Based upon this experience, here are a few pointers to make the sales process go smoothly for sellers.

Remove Underground Storage Tanks

If a tank is old or no longer in use, remove it.  If a buyer does not plan to use the tank or wish to retain the potential liability associated with the tank, he/she will overestimate the cost of the removal and overestimate the cost of potential environmental damages. They may walk away from the deal or want their estimated costs–and then some–deducted from the purchase price.

A properly conducted tank closure and associated environmental report allows you to control the cost. Environmental samples collected as part of the tank closure process will identify and potentially resolve environmental issues that could delay or ultimately cancel a sale.

Tank Testing

If underground or above ground storage tanks are going to be sold with a property, have the tank systems tested by a reputable testing company. The tank testing company can identify and resolve issues such as leaky fittings, deteriorated spill buckets, etc. Present the final tank testing results to the prospective buyer to help avoid unnecessary assumptions and price discounts.

Review Environmental Records

If your business is required to submit environmental compliance records such as stormwater, waste water discharge, air reports, etc., make sure your records are up to date and submitted on time. There is nothing like an inopportune Notice of Violation from the EPA to throw a monkey wrench in your deal.

Environmental Permits

Review your existing environmental permits and ensure they are up to date. Make sure your business is in compliance with the permit conditions. As industrial processes evolve, it is not unusual for processes to exceed conditions in the original permits.

Remove Stains

Oily stains on cement, asphalt or other areas are indicative of spills. Stains from minor spills can persist for years. A minor stain can prompt an extensive environmental investigation and delay closing. Avoid the red flag and clean or replace stained cement, stone, or asphalt areas prior to showing the property.

Replace Dead Vegetation

Dead vegetation may prompt an environmental investigation. Plants are highly sensitive to many types of chemicals and dead vegetation may be an indication of a spill. Of course, there are many other explanations for dead vegetation. Replace the vegetation and avoid prompting a concern.  

Chemical Storage Areas

Get rid of old chemicals. Drums and old paint cans accumulate over time and most people will have no idea what is actually in the containers. Rusting and leaking containers of unknown fluids will alarm the buyer during the due diligence process. They will consider all of the old chemicals to be hazardous waste. It will be cheaper in the long run if you properly dispose of these materials prior to listing your property.

Drains

Inspect floor drains and yard drains and clean out all traps. Determine where the drains lead. As properties evolve, use of drains may change and they may not lead to where you think (ex. Sanitary source connected to a storm drain). It is better for you to find out rather than have the buyer ask for concessions.

Remove Waste

Get rid of the junk. Unused equipment that has accumulated for years can become a source of waste chemicals and oil. Junked vehicles are especially problematic. It is not unusual to find old vehicles with leaking oil, radiator fluids, and lead batteries which will prompt an investigation and provision for remedy as part of the buyer’s due diligence.

Vapor Intrusion

Vapor intrusion is a new hot button with the EPA. Vapor intrusion occurs when there is a migration of vapor-forming chemicals from any subsurface source into an overlying building. Concentration of these chemicals in a building has the potential to cause adverse health effects on building occupants.

ASTM Phase I Environmental Site Assessment guidelines have been modified to include vapor intrusion investigation. These investigations have caused previously closed environmental incidents to be reopened for enforcement action by regulators, thus resulting in delays in sales transactions.

If there is a possibility for a vapor intrusion issue at your facility, perform the assessment ahead of time so that there are no surprises during due diligence.

Make the Environmental Due Diligence Process Smoother

Investigate and disclose potential environmental conditions up front. Besides being the right thing to do, conditions revealed up front no longer become leverage for delayed closings and last-minute price negotiations! It will be much less expensive for you to resolve an issue than to take a discount or lose the sale.

If you make due diligence easy, it reduces the chance for surprises and makes the sale process smoother and less complicated. Eliminate the red flags!

Have a question or need some assistance? Contact us here.

 

Check out our other articles about the due diligence process:

What is a Phase II Environmental Site Assessment?

Why Property Sellers Should Conduct Phase II Environmental Site Assessments

Top 5 Environmental Risks for Property Buyers