In most property transactions, the Buyer and the Lender(s) have a keen interest in the condition of the property. This information, in part, is obviously used to determine the price offered for the property and/or business. During this period, the Seller is most vulnerable –information gathered by the Buyer can be used to negotiate a lower purchase price. But, more importantly, a Seller can be responsible for any clean up or other actions required, whether or not the Buyer actually closes on the property. This information also becomes part of the record which may need to be disclosed to future prospective Buyers, in the event that the current Buyer drops out.
Therefore, Sellers need to be actively involved in all assessments of their properties. This article highlights some of the key considerations all Sellers should bear in mind.
First –expect that prospective Buyers will conduct an environmental assessment of the property. Because Landowner Liability Protections (LLPs) are available to prospective purchasers only if they performed an Environmental Site Assessment prior to closing, many Buyers will routinely conduct an assessment, regardless of any perceived risks. Beyond this, most Lenders will require some level of environmental review prior to issuing any loans. Assuming that prospective Buyers will want some level of environmental assessment, the first question Sellers should ask themselves is whether or not to conduct an assessment themselves, and provide a copy of the report to perspective Buyers. This obviously adds a small “up front” cost to selling the property; however, there are some clear benefits with this approach…
- Allows the Seller to preview the same information the Buyer will have access to;
- Identifies any issues early, allowing time to address them, rather than learning of issues from the Buyer late in the transaction process;
- Avoids further environmental reviews, if the reports are accepted by the Buyer and/or Lender