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Chapter 6 - § 6.5 • MANAGEMENT OF RISK AND ALLOCATION OF LIABILITY
Jurisdiction | Colorado |
A property's environmental circumstances can lead to financial risk for sellers and buyers. The degree of the risk depends on the specific property circumstances and the parties' management of risks. The science and law regarding response to environmental risk have evolved over the last 50 years. Early on, some buyers managed the risk by simply avoiding ownership of contaminated property. As buyers became more sophisticated in managing environmental risk, some began to accept contamination as one among a number of property risks that needed to be managed. If economical, the environmental risk could be removed by completely cleaning up the property. If that was not economical, buyers learned to manage the risk through technical or legal strategy.
Technical risk management tools include:
• Comprehensive property characterization and thoughtfully prepared and executed Phase I and Phase II site assessments;
• If feasible and economical, complete contamination source area cleanup;
• Risk-based cleanups (some contamination accepted) with engineered controls to contain, segregate, or otherwise manage potential exposure to contaminants, such as an engineered cap;26
• Integrating a remedy with the redevelopment profile; and
• Ongoing environmental diligence by the property owner after purchase.27
Several legal risk management tools also have become available:
• CERCLA landowner defenses (discussed in the previous section);
• Buyer and seller contractual provisions regarding allocation of environmental risk;
• Third-party assumption of risk, such as insurance;28
• Available federal statutory or policy risk mitigation tools;
• Available state statutory or policy risk mitigation tools;
• Institutional controls, such as environmental covenants or zoning restrictions, imposing land use restrictions that minimize exposure risks (see Chapter 9); and
• Risk management through local zoning actions.
§ 6.5.1—EPA Risk Mitigation Tools
Chapter 5 discusses the CERCLA statutory exemptions to liability, including innocent landowners, contiguous property owners, and bona fide prospective purchasers. Chapter 7 discusses a CERCLA exemption for financial lenders to a contaminated property. By policy, EPA offers additional liability protection tools. Under appropriate circumstances, EPA will enter into a variety of agreements, essentially Administrative Orders on Consent, with prospective buyers to shield the buyer from contamination liability under one or more federal laws.29 Formerly, EPA offered "prospective purchaser agreements," but since the Brownfield Amendments of2002, obtaining a prospective purchaser agreement from EPA has been more difficult.30 However, again under appropriate circumstances, EPA will enter into an Administrative Order on Consent that achieves the same purpose, providing covenants not to sue and other liability protections, usually limited to CERCLA liability.31 Also, far short of an agreement, EPA may write what is known as a "comfort letter," which merely expresses...
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- Chapter 6 Selling and Leasing Property
- Chapter 6 - CHAPTER 6 SELLING AND LEASING PROPERTY
- Chapter 6 - § 6.1 • INTRODUCTION
- Chapter 6 - § 6.2 • SELLER'S DISCLOSURES
- Chapter 6 - § 6.3 • SELLER'S REPRESENTATIONS AND WARRANTIES
- Chapter 6 - § 6.4 • BUYER'S DUE DILIGENCE
- Chapter 6 - § 6.5 • MANAGEMENT OF RISK AND ALLOCATION OF LIABILITY
- Chapter 6 - § 6.6 • THIRD-PARTY AGREEMENTS
- Chapter 6 - § 6.7 • LANDLORD-TENANT ISSUES
- Chapter 6 - FORM 6A • SELLER'S PROPERTY DISCLOSURE
- Chapter 6 - FORM 6B • LEAD-BASED PAINT DISCLOSURE (SALES)
- Chapter 6 - FORM 6C • DISCLOSURE SCHEDULE
- Chapter 6 - FORM 6D • NON-DISCLOSURE AGREEMENT
- Chapter 6 - FORM 6E • LETTER OF INTENT
- Chapter 6 - FORM 6F • EXCLUSIVITY PROVISION
- Chapter 6 - FORM 6G • DUE DILIGENCE CHECKLIST
- Chapter 6 - FORM 6H • ALTERNATIVE FORMS OF LICENSE FOR ACCESS
- Chapter 6 - FORM 6I • BUYER'S INSPECTION
- Chapter 6 - FORM 6J • APPROVALS CONDITION
- Chapter 6 - FORM 6K • EPA REASONABLE STEPS LETTER
- Chapter 6 - FORM 6L • PURCHASE AGREEMENT CLAUSE — SELLER TO PROVIDE ALL REPORTS
- Chapter 6 - FORM 6M • PURCHASE AGREEMENT CLAUSES — ALTERNATIVE FORMS OF SELLER'S REPRESENTATIONS
- Chapter 6 - FORM 6N • PURCHASE AGREEMENT CLAUSE — BUYER'S NON-RELIANCE ON SELLER'S INFORMATION
- Chapter 6 - FORM 6O • PURCHASE AGREEMENT CLAUSE — "AS IS" SALE
- Chapter 6 - FORM 6P • PURCHASE AGREEMENT CLAUSES — DUE DILIGENCE PROCESS
- Chapter 6 - FORM 6Q • PURCHASE AGREEMENT CLAUSE — SELLER CONTROLS ENVIRONMENTAL INFORMATION
- Chapter 6 - FORM 6R • PURCHASE AGREEMENT CLAUSE — BUYER MUST RETURN DOCUMENTS
- Chapter 6 - FORM 6S • PURCHASE AGREEMENT CLAUSES — INDEMNITY
- Chapter 6 - FORM 6T • PURCHASE AGREEMENT CLAUSE — THIRD-PARTY INDEMNITY
- Chapter 6 - FORM 6U • PURCHASE AGREEMENT CLAUSE — THIRD-PARTY AGREEMENT
- Chapter 6 - FORM 6V • BUYER RELEASE OF SELLER
- Chapter 6 - FORM 6W • ENVIRONMENTAL INSURANCE
- Chapter 6 - FORM 6X • LEASE PROVISION — QUIET ENJOYMENT
- Chapter 6 - FORM 6Y • LEASE PROVISION — RIGHT OF ENTRY
- Chapter 6 - FORM 6Z • LEASE PROVISION — CONDITION OF LEASED PREMISES
- Chapter 6 - FORM 6AA • LEASE PROVISION — USE OF LEASED PREMISES
- Chapter 6 - FORM 6BB • LEASE PROVISION — COMPLIANCE WITH ENVIRONMENTAL LAWS
- Chapter 6 - FORM 6CC • LEASE PROVISION — WASTE MINIMIZATION
- Chapter 6 - FORM 6DD • LEASE PROVISION — USE OF HAZARDOUS MATERIALS
- Chapter 6 - FORM 6EE • LEASE PROVISION — ENVIRONMENTAL REPORTS
- Chapter 6 - FORM 6FF • LEASE PROVISION — ENVIRONMENTAL TESTING
- Chapter 6 - FORM 6GG • LEASE PROVISION — SURRENDER OF LEASED PREMISES
- Chapter 6 - FORM 6HH • LEASE PROVISION — ENVIRONMENTAL INDEMNITY
- Chapter 6 - FORM 6II • LEASE PROVISION — TENANT'S ACKNOWLEDGEMENT OF ENVIRONMENTAL CONDITIONS
- Chapter 6 - FORM 6JJ • LEASE PROVISION — TENANT'S ENVIRONMENTAL DISCLOSURE
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