environmental contamination - Posted by ron

Posted by george on June 12, 2000 at 19:45:59:

I no nothing about this subject. With that said since you are buying an industrial building you will need insurance specific to an industrial type operation. Contact a knowledgable insurance broker and ask about tanning specific liability coverage. The underwriters at whichever insurers insure such things probably have more horror stories than you care to hear.

Is the 3.5 - 5k (1% of 325k) cost of the study that big a deal?

environmental contamination - Posted by ron

Posted by ron on June 12, 2000 at 18:25:15:

My partner and I are very interested in a warehouse (78,000 sq.ft) that has very nice positive cash flow. ($325k selling price w/ $32,000 annual cash flow. The problem arises from the fact that this property was once a tannery and we don’t know what kinds of contamination, if any, that might be present. We have offered to split the costs of a Baseline Environmental Assessment (BEA), but the seller is not convinced that a BEA is even necessary and will agree to split the costs only if we agree to pay for half of this study regardless of whether the deal closes or not. The cost estimate we got from and environmental consultant is 7 to 10k for the BEA (phase 1, 2 and BEA document). Question #1- does anyone know what kind of chemicals or contamination might be present from tanning hides? Question #2 Any suggestions on how to structure our offer to overcome his demands that we pay for half of the study, even if the deal does not close? Please give us your thoughts as we think this is a good investment. (By the way, it will be $0 down w/ owner taking 25% 2nd mortgage at 8%) Thanks in advance. Ron in Michigan

Re: environmental contamination (long) - Posted by Ben (FL)

Posted by Ben (FL) on June 14, 2000 at 16:34:59:

I posted a reply to this yesterday, but got worked up and used foul language and the message got pulled. I am reposting the rated-G version.

I am in REI to get out of my J.O.B. which is environmental consulting, so I know a little about what you’re looking at.

  1. A Phase I is a paper search to see if the potential for environmental impacts exists. Since the place was a tannery, the answer will be “Yes.” Go to a phase II. These usually don’t cost more than $2k but can go as high as $10k.

  2. A Phase II involves drilling to collect subsurface soil and groundwater samples. The purpose is to target likely area and see if any contamination does, indeed, exist. Since, until the 1980s, the most common method of smelly, toxic waste disposal was to throw it out the back door, the answer will, again, probably be yes. This can cost from $10k to $50k, or more, depending on the number of samples required.

  3. At this point, the state regulatory body will step in and require that someone (the owner) pay to see how much contamiantion there is, and how far it has spread. This involves additional investigations, and can cost tens of thousands of dollars.

  4. To get to the point were the amount and extent of contamination is know can take one or more years. If enough contamination is found at high enough levels, the state will require that someone pay to clean it up. If you buy the property without some sort of clause pinning responsibility for the contamiantion on the seller, you may get stuck with the bill. Cleaning up the mess can cost seven figures and take many years. All the while, the property is useless.

Now there are programs with many states that either pay all or part of clean up of past contamination. This site may also qualify for the Brownfields program. If, for example, large amounts of groundwater contamination were found under your warehouse, but little or no soil contamination was found, then, through the Brownfields program, the site could still be used as a warehouse, as long as no one withdrew any water, either for drinking or landscape.
Call your local state environmental regulators - The Michigan department of environmental protection, or Michigan EPA, or somehting like that, and ask them what your options are.