Ignoring Environmental Due Diligence Could Be Costly


We have all heard the saying “ignorance is bliss,” but in the area of real property acquisition, the more important idiom is “what you don’t know can kill you.” That may be a bit dramatic, but what you don’t know about a property’s condition could certainly cost the acquiring special district a lot of taxpayer money – money that would be better spent fulfilling the agency’s statutory purpose, rather than cleaning up someone else’s toxic mess.

On any property, there is always the potential that contamination undetected by the human eye is hidden in the soil, lurking in the groundwater or tainting the buildings. Take, for instance, the true story of a public agency in California, whose name has been changed to protect its identity. “Public Agency X” identified a certain parcel of property that it could use for a future development project. It later discovered that the property owner defaulted on its taxes and the property was up for a tax sale by the county, meaning it could be nabbed at a great bargain.

Public Agency X contacted the county and purchased the property for the cost of the unpaid taxes at a fraction of what the property would presumably sell for on the open market. Sounds like a great deal, right? The next thing the agency knows, the U.S. Environmental Protection Agency (EPA) is knocking at its door. The federal agency identified the property as a source of major contamination and designated the local agency as a “responsible party,” ordering it to clean up the property or face penalties of up to $32,500 per day, in addition to potential damages.

Originally published in California Special District Magazine, Volume 8, Issue 6, Nov - Dec 2013.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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