The Overlooked Importance of Fresh Environmental Diligence

To many prospective purchasers and lessees of real property, and to many lenders involved in such transactions, environmental due diligence can seem pro forma; it is simply the box you check in order to achieve the inevitable completion of the transaction. Those thoughts are according to Matthew Dombroski, an environmental litigation attorney at Manatt, Phelps & Phillips LLP, located in the New York office, and Michael C. Polentz, co-chair of the real estate and land use practice group at Manatt, Phelps & Phillips LLP, located in the Palo Alto office. According to the two, environmental impairment can rear its ugly head in multiple, extremely costly ways, however, so those prospective purchasers and lessees, and their lenders (as well as their respective environmental counsel), must ensure that environmental due diligence is performed carefully and without shortcuts. In particular, they say, these parties should cause any environmental due diligence to be performed so as to satisfy the “All Appropriate Inquiry” or “AAI” requirements for limited safe harbor, including the often-overlooked “freshness” requirements of the AAI standard, which will in turn provide the prospective purchaser, lessee, and lender a robust environmental characterization of the property for valuation and risk mitigation purposes.

The views expressed in the commentary below are Dombroski and Polentz’ own.