Real estate & environmental due diligence: An issue is not the end

Environmental due diligence is important for a number of real estate transactions, including the purchase of a vacant lot or any other lot with plans for future development.

A basic timeline

The process generally starts with a review of the records connected to the property. The next step involves a site inspection and interviews with any current or past property owners as well as local government officials. In some cases, samples of land and water may also undergo testing for contamination.

A second, more thorough investigation may take place if the first results in the discovery of contamination. This can include additional testing of water and soil samples as well as geophysical testing to look for any underground or buried storage tanks.

Avoid surprises

The investigation should gather information about the previous use of the land. This is beneficial in the event of potential contamination. Options are available if contamination is present. An interested buyer could require the current property owner address the contamination or reduce the cost to purchase the property.

There are also options that can aid in the clean-up of contamination. In some cases, the property may qualify as a brownfield. A brownfield is an environmentally contaminated abandoned or underused property. The Arizona Department of Environmental Quality notes that the revitalization of this type of property can serve a number of benefits to the local community. In addition to reducing environmental hazards, these projects can also boost the economy by bringing in business opportunities and tax revenue.

As such, grants are available that can result in funding to help cover the costs associated with cleaning up a brownfield. To qualify, the property must meet the state's definition of a brownfield. In Arizona, these three criteria must be met to qualify:

  • Unused. The property must be considered either an unused or underused commercial or industrial site.
  • Potential. The property owner must also establish that the property in question has redevelopment potential.
  • Contaminated. The redevelopment must be hindered by the presence of contamination.

This is just one option to take into consideration when making a real estate deal. This type of due diligence is an important step towards mitigating the risks that can come with these real estate transactions, but a risk is not always a deal breaker. Various options may be available that can help mitigate the risk and better ensure the deal moves forward and your business interests are preserved. Contact an attorney experienced in real estate acquisition and development deals in Arizona to discuss your options.