Superfund Success or Failure: the Effects of Environmental Disclosures Within Commercial Property Transactions

Under Superfund legislation, the innocent landowner defense has led to the use of environmental site assessments (ESAs) as a common practice in the acquisition and financing of commercial property. The objective of this inquiry was to examine the effects of environmental risks and liabilities as disclosed in ESAs in the acquisition and financing of a set of commercial property transactions in the Portland, Oregon metropolitan area. The findings suggest that transaction prices are not reduced in the structuring of risk and liability. In addition, financing is likely to revert to seller financing when environmental risk and liability are present. Furthermore, the Superfund liability provisions have led to the mitigation of environmental degradation in the acquiring of commercial properties with minor environmental problems while those with more substantial problems may not be acquired or financed. Policy implications are posited addressing brownfield redevelopment issues. Commercial real estate brokers, attorneys, and lenders; and professionals in environmental law, policy, planning, and economics should find this research useful and enlightening.