Environmental Issues
I am looking at an industrial property that was formerly used for industrial machine repair work and before that as an automobile repair shop. I have been told by a broker that a bank will require a Phase 2 environmental review of the property and that if that comes back clean the bank will be satisfied. My questions are as follows:
1. Is a Phase 2 review finding of no contamination conclusive or does it simply indicate no contamination in the test holes and there is a possibility contamination might have gone undetected.
2. If the Phase 2 comes back clean and I flip the property and contaminatioin is later detected is my LLC still on the hook because I am in the chain of title even though I did not contribute to the contamination?
3. Are there any other issues I am missing?
I am assuming that a Phase 1 review has come back and that the Phase 1 report identified specific areas of concern.
1. Is a Phase 2 review finding of no contamination conclusive or does it simply indicate no contamination in the test holes and there is a possibility contamination might have gone undetected.
No-- it is not conclusive. A lot depends on how good the phase 1 was. It is allways possible that contamination zones have been missed.
2. If the Phase 2 comes back clean and I flip the property and contaminatioin is later detected is my LLC still on the hook because I am in the chain of title even though I did not contribute to the contamination?
Probably so. Then again does your LLC have any assets which are attachable?
3. Are there any other issues I am missing?
Well, it sounds like a fairly small site. The odds of any large scale contamination being missed is pretty small. Small scale contamination is usually relatively easy to clear up (exceptions do, of course, exist).
Thank you for both replies. I have not obtained a Phase I, but I have been told that given the history of the property, a bank will automatically require a Phase II. It is a small property, but it is also up slope less than 500 yards from a river, so the powers that be would probably be stringent about any clean-up. Given the officer liability mentioned, although the risk of missing the contamination is low, the consequences if contamination is found later could be substantial which was prompted my question.
Under CERCLA, does the fact that I did not contribute to the contamination matter or is it strict liability for anyone in the chain of title?
The range from .30~.65 could be accounted for by the features/quality/condition/neighborhood etc.
As in most things, rates are set by the current market, not by a "commercial MLS system".
Be sure that you compare units with similar "c.a.m." charges, escalations, and pass throughs.
Try to make conversation with someone who is currently leasing in the area.
You are more likly to get accurate numbers from them then from a commercial broker.
Eric Haggin,
East Bay Plus
[ Edited by EastBayPlus on Date 03/29/2006 ]
Proceed to go to the county clerks office and access all property information. Be advise, that some property owners my have their properties listed under trust names on in corporations!
I have been focused on this idea also. One of my properties is a small commercial office which I hope to rent to a small law firm or similar "niche" tenant.
I put an ad in the local Law journal and mailed postcards to law firms in the area. I also have spoken directly with court reporters because they know hundreds of lawyers.
If you want a music teacher, advertise to piano tuners not to the teachers directly.
Perhaps if you offered to pay for tenant specific TI (sound proofing, lifts, etc.) you could attract the type of tenant you want.
Eric Haggin
East Bay Plus
You should purchase a target market list to help yu market to a defined potential tenant. Usually an SIC code, then some other parameters to narrow down the scope
Perhaps if you describe the property and the zoning, maybe we could help you with more specific ideas.
How old is it? How many rooms or is it one big space? What type of construction - steel building, with lobby area? One bathroom?
What types of neighboring business do you have?
How far is downtown, are schools, manufacturing, airport?