Once you’ve narrowed your search to a particular space for your business, you’ll want to make sure that it’s really appropriate in terms of location, size, rent, applicable zoning laws, and your design needs. If you’re renting a small space in an office building, you may be confident that the space (and the prospective landlord) are just right, and you’re ready to sign a lease. But for some businesses, especially those renting industrial space in a building where polluting substances such as solvents may have been used, you’ll need to do some additional work, such as arranging an environmental inspection, before you sign a lease. Here’s why (and when) you should be concerned.
Environmental Hazards and the Law
Many powerful federal and state laws (and some local laws) target environmental contamination and hazardous substances, including: petroleum-based products and solvents; natural and synthetic gases; PCBs; asbestos; sewage, garbage, and waste products from health care facilities or offices; lead-based paint; and other biological or chemical toxins.
The federal government prohibits, monitors, and regulates environmental contamination via two hefty pieces of legislation:
- The Resource Conservation and Recovery Act of 1976 (42 U.S.C. §§ 6901 and following), or RCRA, which deals with contamination leaking from underground storage tanks, and
- The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601-9675), or CERCLA, commonly referred to as the “Superfund,” which covers chemical contaminants released from just about everything except underground tanks.
Other federal laws that may apply to the property that you are leasing or the operation you intend to run, include the Clean Air Act, the Toxic Substances Control Act, the Occupational Safety and Health Act, and the Federal Water Pollution Control Act. Also, many states (and some localities) have enacted their own environmental statutes and regulations that may be more stringent and far-reaching.
For more information, check out the Environmental Protection Agency (EPA) website which includes links to all federal legislation concerning the environment, a small business section that includes frequently asked questions, plus a listing of state and local offices.
Why Pay Attention to Environmental Problems
Your concern for the environment, your health, and that of customers and employees is certainly motivation enough to check out potential problems. But if that’s not sufficient, consider this: If an environmental pollution problem lands on your doorstep, you have a legal problem of significant proportions. Here’s why:
- You may have to pay the entire cost of clean-up even if you were only slightly responsible. If you use leaky chemical storage tanks that prior tenants have used, you could end up footing the entire bill for the clean-up cost too, courtesy of a legal principle known as “joint and several liability.”
- Your “compliance with all laws” lease clause (standard in commercial leases) may make you responsible for contamination that surfaces during your tenancy. This is the case even if you didn’t cause or even know about the problem—such as solvent under your parking lot that leaked from a prior tenant’s storage tank.
- Tough statutes may make you responsible for the clean-up bill, even if you’re not at fault. Government agencies that enforce the contamination and pollution laws may be able to demand clean-up costs directly from you, the current tenant, and simply bypass the former tenant, neighbor, or landlord who may in fact be the cause of the problem.
Types of Businesses That Should Worry About Environmental Hazards
Many tenants won’t have to worry at all about environmental contamination. Those who rent space in multilevel office buildings, for example, are unlikely to encounter problems with pollutants in the ground. Well-maintained properties, with insulation and paint in good repair, won’t usually pose a health risk to employees and customers.
You’ll need to be especially aware of possible environmental problems (and liability) in the following situations:
- Your business involves any of the substances that are likely to be viewed as potential toxins (even the smallest contribution to a pre-existing problem can expose you to the entire clean-up cost).
- You intend to do extensive remodeling that will involve disturbing the ground (paving for a parking lot or building an addition onto an existing structure, for example, that may unearth previously undetected problems and trigger an environmental inquiry).
- The rental property is near a current or former gas station, where underground storage tanks may fail and contaminate soil and groundwater.
- Prior tenants or neighbors, such as dry cleaners or auto repair shops, used toxic materials (and were possibly careless in their storage and disposal habits).
- You’re renting space on or near a wetland (a marsh or seasonally wet area, such as a field that naturally floods in winter), which are monitored closely by the EPA.
- The building has deteriorating asbestos (a known health hazard), or paint that’s in bad shape (breathing or ingesting the dust from deteriorating lead paint causes health problems, especially in young children).
Even if none of these situations affect your rental space, be especially vigilant if you’re renting in a building near a school, playground, or recreational area where children spend large amounts of time. Parents and public officials will be quick to respond to any hint of pollution nearby. If the source is traced to your rented premises, the government will be under pressure to make the owner (and possibly the tenants) deal with the problem quickly and effectively.
This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman.