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    LSchnapf
    How Bank Acquisitions Have Resulted In CERCLA Liability
    Entry posted March 20, 2012 by LSchnapfElite Contributor 
    355 Views, 1 Comment
    Title:
    How Bank Acquisitions Have Resulted In CERCLA Liability
    Entry:

    Much of the environmental due diligence performed for commercial real estate and multi-family properties transactions is a result of requirements imposed by banks as conditions for issuing loan commitments. In many ways, lenders frequently act as surrogate regulators, requiring borrowers to investigate and remediate contamination.

    However, when it comes to their own transactions, lenders sometimes follow the old adage “Do as I say, not as I do” and may perform a level of due diligence that is less rigorous than they would require of their borrowers.  

    Perhaps the most glaring example involved the White Swan Cleaners superfund site in Sea Girt,New Jersey. The White Swan Laundry and Cleaners had operated at the site located inWall Township,New Jersey. PCE had been was discharged from the dry cleaner into two on-site septic systems where it subsequently migrated into the groundwater.

    Sometime after dry cleaning operations ceased, the property was acquired by Summit Bank who converted it to a bank branch. Fleet Bank then took title to the property when it acquired Summit Bank. Apparently, neither bank appeared to perform the kind of environmental due diligence that they customarily expect from their borrowers. They decided to not do any diligence-not even transaction screens on the branch offices. Had the banks examined the historical use of the property, they would have learned about the dry cleaner and also that the property had a septic system.

    For the full article, click on link to my website: http://www.environmental-law.net/2012/03/acquisitions-bring-cercla-liability-to-banking-conglomerate/

    Comment

     

    • PWoloszyn

      Thanks for sharing. Important information not included in the article is the time period that Summit Bank acquired the property and the time period that Fleet Bank acquired Summit Bank. Having this information would be much more telling relative to the evolution of the practice of environmental due diligence. And, the Fleet Bank transaction appears to be more of a pre-purchase corporate audit issue rather than traditional phase I environmental assessment due diligence.

      I know of one bank that foreclosed on a dry cleaner property generally before the advent of environmental due diligence - that was just bad luck. They got stuck with a significant multi-million dollar liability. In response to that, the bank became a pioneer and national leader in lender liability policy.

      I know of a different bank that foreclosed on a property in the mid-1980's. The local fire department told them it would cost about $10K to cleanup the property. $3,000,000+ and 25 years later the commingled groundwater contamination project finally obtained regulatory case closure. Just bad luck, considering the time period. Again, subsequently, that bank pioneered and earned the reputation as one of the best in the nation re: environmental due diligence.