DEP Buy-Sell Agreement Makes It Easy
by Bill Gladstone, CCIM, SIOR

While selling properties in the redeveloping former industrial district on South Cameron Street in Harrisburg, Pennsylvania, we often come across environmental conditions on properties which slow down the sale. The Department of Environmental Protection (DEP) has a business model that allows for a buy-sell agreement to be put in place so a settlement can occur. It’s a three-way agreement between the Commonwealth, seller, and buyer to relieve the buyer of future liability for environmental issues, even if the environmental cleanup is still being completed. In the case I currently have at hand, a former car repair facility is under agreement. Some prudent sampling using monitoring wells was conducted to determine if the ground water under the site has been impacted by off-site sources, the previous car repair operations, or the three underground storage tanks that were removed as part of the project. Miraculously, it has very little environmental contamination from the previous users of the property.

Through the installation and sampling of the monitoring wells, the environmental ground water contamination issues were clearly identified. With the help of Brad Wolf of BL Companies, a local engineering company with a strong environmental division, the buy-sell agreement was discussed. The buyer and seller had their attorneys review the agreement. With minor changes, it was found acceptable. BL Companies completed the first round of ground water sampling. The samples were found to have levels of contamination below the minimum standards. A second round of ground water testing was scheduled for one month later. At this point, we actually set the settlement for about 45 days out, knowing that we would have our fully executed buy-sell agreement easily in front of the DEP. At the same time, BL Companies began preparation of a remedial action plan, which directly indicates future responsibilities and liabilities for the seller to accompany the buy-sell agreement. The key to the remedial action plan was to draft it in a manner that outlined all the potential tasks that could have been necessary based on the results of the second round of ground water sampling.

However, the second round of testing again showed amounts of contamination in the ground water below the applicable standards and, therefore, the remedial action plan would not have to be carried as far into the future as we had originally discussed (which could have been up to eight quarters of testing, approximately two years). Mr. Wolf notified DEP of our settlement date and although they could not commit to it, they were willing to do what they could to provide us with an approved buy-sell agreement and remedial action plan. As it turned out, although we had contamination on the site, the bigger issues we faced were vandalism, insurance for an empty building, and a fallen tree. It almost seems ironic that in today’s world the environmental issues were taken care of so easily, leaving us with these three other items which are typically much more controllable.

If you are not familiar with the buy-sell agreement, it is a very concise business model. If more information is necessary, you can contact Kathleen Horvath, P.G. Chief of the Special Projects Section at PA DEP (khorvath@statepa.us) From an operation standpoint and how it works in the field, Brad Wolf, Senior Project Manager at BL Companies (bwolf@blcompanies.com) is an excellent resource. It has been our experience that PADEP wants and encourages buyers and sellers to utilize this valuable tool as a means to promote the transaction and successful redevelopment of contaminated properties.

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