Chapter 6 - § 6.6 • THIRD-PARTY AGREEMENTS

• Jurisdiction: Colorado

§ 6.6 • THIRD-PARTY AGREEMENTS

It is not unusual in contaminated property transactions that one or more parties responsible for the contamination are third parties other than the buyer and the seller. Prior landowners and lessees of the property and owners and lessees of adjacent or nearby properties are examples of third parties that can become necessary or desired participants in a contaminated land deal. The use of third-party or "side" agreements can be an effective means of removing environmental impediments to closing. Where third parties are responsible for the contamination that is impeding the transaction, remediation and indemnification agreements can be used to protect buyers, sellers, lessors, and lessees of the subject property.

In those circumstances, sellers and buyers of contaminated land can approach the responsible third party and request a contractual commitment to clean up the subject property and to indemnify the buyer and/or seller against potential liability related to the contaminants.

Several issues should be considered in negotiating a remediation and indemnification agreement with the responsible third party. The transacting parties normally prefer indemnification coverage to extend to lenders, future grantees, assignees, tenants, and so forth. However, most responsible parties will be reluctant to extend indemnification beyond the transacting parties and perhaps the buyer's lender. Rarely will a sophisticated third party enter into indemnification that can be construed as "running with the land."

The transacting party should also consider the appropriate cleanup level to be required of the responsible third party in light of the intended future land use. Regulatory agencies normally only require cleanup to a "risk based" standard; the property owner or developer may desire a more protective level of cleanup related to the development plans...