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<br />01/27/1998 1&:12
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<br />&124841903
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<br />GARY MCLEAN INC
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<br />PAGE 04
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<br />I Ill' , \ "'" ,ill' ,on oj P I oJ" \,' ;(). h(1 r), "..le.n "T~ all a I., lIulll., ,'( '1"' n
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<br />OctDber 1992
<br />
<br />12251 Tech Road, SUver Spring, Maryland 20904
<br />
<br />(301) 622.1900
<br />
<br />Environmental Factors Making
<br />Lenders Cautious
<br />
<br />In Regulatory and Legislative Bulletin No.6, "EnviJon-
<br />mental Factors Ie Consider with Plant Location!!," We <fis,.
<br />cuased thoso ractors associated with buying. dJycleartin8
<br />plant as well u state property transfer requitesnenb and the
<br />willingness of financial institutions to make Ioa.ns to the
<br />cbvdl!l!.Nng industry.
<br />Since we last dl!ICUSsed the;" jssues, th" legal ramifications
<br />involved with buying and selling commercial property, due
<br />Ie ~vironmentBl factors, has contU\ueQ to incf@3se Clnd hAs
<br />become, at best, clouded with confusion. Federal and state
<br />regulations spurred by the 1980 Comprehensive Environ-
<br />mental Response, Compensation, and Liability Act
<br />(CERCLA). better known as "Superfund," has raised the
<br />publlc'. aWllreness of the environment.
<br />With Superfund'lIlItnmg grasp, we know that e\<1lll hazardous
<br />W'O!Ites which were legally di9~ of in landfilla Yell.r.I ago can
<br />come back to haunt you If the landfill b<<omes II Superfund
<br />cleanup site. Additionally, the courts have made decisiON that
<br />have made unsuspecting, Innocent buyers of contaminated
<br />property alto potentially responsible for cleanup. The courts
<br />have alto decided, in some CB!Ie5, that Eina.nc:J:i1 institutions.
<br />such as banks and mortgage !enda'S. 900uJd shIN the cost for
<br />the cleanup of a businQS!! even though ttwy had no actual
<br />manag~ent control of that business. This !Ie1'ious trend
<br />makes lenders cautious, many times restricting them from
<br />lending money In bustru~sses thllt Wie potentially hazardous
<br />materiw.
<br />Many 90U and ground wlitl!!r contamination cases that
<br />have involved dryc1eaners, !!Specially thoJe using per-
<br />chloroethylene (pen:), have forced the drycleaner to pay tor
<br />the entire cleanup cmt even Ittougll other indusbies also use
<br />pert, and pert ill available In commercial pt'Oducts which
<br />J1UIy have also contributed to the contamination.
<br />Finally, while the property contaminamd (by chemiclils
<br />such. u perc) can usually be cleaned up, current It!Vcls are tet
<br />so low that it generally takes not weeks or months, but. in
<br />many cases, years for ~mplete site remediation.
<br />In this buUet:iJ'l. we will look at some of th'" C!Jwironmental
<br />lacten to consider when buying, selling, at amsidoring a Joan
<br />lor . dtyclsanin8 plant.
<br />
<br />The Issue of Money
<br />
<br />It wall not that long ago that the only thing that pNvented
<br />a buyft from obtaining a loan was their ability to repay il U
<br />you were selling your bUSineSl, the biggest concem was
<br />getting a fair price. and hopefully II large down payment
<br />Whon it was tima to purchase equip[1\@f\t, you went to the
<br />bank (the same bank you had been doing business with for
<br />yurs) and asbd them for II 1000n based &c the strength of
<br />your bU!lioeBII. for many of us, these are the trBditionBJ and
<br />10giCIII approadws to business financing and the method by
<br />
<br />which past genst'll~OIU hav" handkld buy~ and Belling
<br />plants and equipment pUrchli5eS,
<br />Today's business climatl! Is changing /'\Pt only are finan-
<br />cial inlltitutions faiUng in nlCord numbers themselves, but
<br />healthy ones are tightening their belts and limiting th"ir
<br />cxposure to potentLtlly bad loans. One reason b. of course,
<br />the difficult economic: climalll we are currently fst;ing which
<br />generally change9 as the economy changes. Another reason,
<br />which 15 much 1110!9 serious, is environmental factors. Finan-
<br />cially-interest2d parties lI1'e particularly concem.ed about
<br />today's envimruncmtaJ problems with relll estate.
<br />
<br />Buying and Selling A
<br />Drycleanlng Business
<br />
<br />Whether you are buying or selling a business, roal estate
<br />problel1l9 coused by contBmlMtion fort::eS lende(S to c;hoo5e
<br />their risks carefully. Many lenders eJtClude tending mcney 10
<br />businesses, sue}, 119 drydea.nef8, that use hazardoU! materials.
<br />Not only is there II chance that a lender will lose out on Ii
<br />bad loan if the business defaults, but the EPA and the courts
<br />can require the lender to pay for all cleanup casts if it is found
<br />that the business is contaminated.
<br />AI the Americ;an Bankers Association has stated, "Instead
<br />of eJ:posing th~1ves to l.awlluils, many lendtlft will lJimply
<br />I!Ivoid making litigation-prone loam to a long li9t of er'Il2r.
<br />pr15e!1." DryclsaNng WQS among th~ ltIdU81ries mentioned u
<br />"litigatiun-prone. M
<br />Lenders are finding It necessary In perform a Phase I
<br />qualitative (@view of the real estah! and/or test the site for
<br />ront!lmination befoft! any transaction, i.e. buying or 5'!lIing
<br />a drycleaning businl!8s, can OCCIU'. At minimum, a Pha~ I
<br />site a,sessment includes;
<br />. the investigation of current and previous owners' of the
<br />site,
<br />. the inspection of the land and buildings o.n ttle property,
<br />. the contact of all environmental agencies to detennine
<br />if there are appropriate permits in UII8 118 well as ~y
<br />compliance with probtelN of the site,
<br />. the! I'Gvlew of adjal::ent prope:rti99, and
<br />. the te\'iew ot all activilies of the sile.
<br />Other factortl which mayor may not be part of a Phase 1
<br />review but which plant owner! have greab!r control over and
<br />should be lookJng at lire:
<br />. actual iOiI tasbi,
<br />· data gathering,
<br />. presence of wtderground starsge tanks,
<br />· living spaces,
<br />· common wells.
<br />. vapor exhausts, and
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