Avoiding Environmental Liability in Workouts

Avoiding Environmental Liability in Workouts

In this paper, Randall M. Lutz, a partner in the Environment, Energy and Utilities Department, writes about the unique set of challenges lenders and borrowers face in a real estate workout when some or all of the collateral for the existing or future lending facility is environmentally challenged. The paper explains how the "Superfund" law, passed in 1980, and other federal legislation enacted around that time, changed the behavior and practices of businesses to help them avoid environmental liability. For example, many commerical and industrial companies hired environmental compliance officers to assist in understanding and following the federal laws.
He recommends environmental protections that a borrower and lender should consider when considering a workout, including the structure of the land holding, federal brownfields and state voluntary cleanup programs, indemnities against environmental claims and insurance matters.