Navigating Lender Liability for Environmental Cleanup and Remediation Costs

Indemnification Agreements, Insurance, Reps and Warranties, Covenants, Loan Defaults, Workouts and Foreclosure

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, February 4, 2016

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will discuss lender liability in real estate loan transactions for environmental cleanup and remediation and how the lender can minimize direct liability as well as diminution of value of collateral due to environmental damages. The program will discuss risk mitigation in loan origination as well as during the life of the loan, including loan workouts and foreclosures.

Description

While federal law largely shields lenders from environmental liabilities and cleanup costs on indebted properties, lender missteps and poor loan documentation can result in a loss of that protection and put lenders on the hook for environmental remediation.

Environmental hazards can also negatively impact a borrower’s ability to repay the loan and decrease the value of the collateral, which is why it is essential to uncover the hazards prior to the closing of the loan and formulate a plan whether a Phase I environmental site assessment or some lesser action.

A critical protection for the lender is an indemnification agreement with the borrower as part of the loan documentation. Other key loan agreement provisions include reps and warranties, covenants, notice provisions, and inspection rights. Another option for the lender is to require the borrower to obtain insurance, usually in the form of a pollution policy.

Lender environmental due diligence at the time of a loan default or workout is also critical as environmental hazards must be considered in assessing the value of the collateral and a workout plan. Of course, if foreclosure appears imminent, the lender liability must be carefully evaluated as the lender prepares to take possession of the property.

Listen as our authoritative panel of experienced attorneys analyzes lender liability for environmental cleanup and remediation liabilities. The panel will discuss theories of liability and best practices for lenders to minimize direct liability as well as diminution of value of collateral. The panel will address risk mitigation in loan origination as well as during the life of the loan, including workouts and foreclosures.

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Outline

  1. Theories of liability (tort and statutory)
  2. Indemnification agreements
  3. Insurance, reps and warranties, loan covenants, inspection rights
  4. Lender’s due diligence at time of loan default, workout, foreclosure

Benefits

The panel will review these and other key issues:

  • What pitfalls do lenders face that may result in lender liability for environmental cleanup and remediation liability?
  • What are the key elements of environmental indemnity agreements?
  • What are best practices for lenders to evaluate and manage environmental risks in real property loan transactions?

Faculty

Hayhurst, Ren
Ren R. Hayhurst

Partner
Bryan Cave

Mr. Hayhurst's practice focuses on all aspects of lender representation, including real estate and commercial...  |  Read More

Keith B. Walker
Keith B. Walker

Partner
Cox Castle & Nicholson

Mr. Walker is experienced in representing clients with interests in redeveloping brownfield properties, providing...  |  Read More

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