Florida has a number of state-specific environmental disclosure obligations, although many of those disclosures arise only in the context of residential real property transfers. For purposes of commercial real property transfers, there are fewer required environmental disclosures. Such disclosures include a radon disclosure using statutorily prescribed language for transactions involving the sale or lease of property containing any buildings to warn that elevated radon levels have been detected in buildings in the state, and a coastal property disclosure to notify the prospective purchaser that the property may be subject to coastal erosion and to certain federal, state and local regulations governing coastal property protections and the protection of marine turtles. There are also a number of federal environmental disclosures that could be applicable in the context of a commercial real estate transaction, including federal asbestos regulations that require a building/ facility owner to transfer to successive owners written records of any notifications concerning the identification, location and quantity of asbestos or presumed asbestos - containing materials; and, to qualify for an innocent purchaser or other defenses under the federal "superfund" law, when transferring ownership of a property, a seller must disclose any known release or threatened release of a hazardous substance at such facility when the seller owned the real property.
Questions & answers
What environmental disclosure obligations apply to real estate sales in Florida?
We are interested in purchasing commercial real estate in Florida and have been directed to look up environmental disclosure before deciding on options.
In these transactions, pursuant to the purchase contract, a Seller is, typically, obligated to turn over all the environmental reports, test, and such that it has so that the buyer can conduct its environmental due diligence. While it's site- and deal-specific, the reps and warranty provisions would include disclosures in order to address any issues that were contained in these reports, test, etc. provided. Depending on what, if anything, is at issue, the negotiation of the purchase contract would involve Seller's retention of its remediation and clean up obligations and indemnification of the buyer therefor. In addition and regardless of what the reports, tests, etc. of Seller contain, buyers also conduct their own environmental due diligence of the property to be acquired. Typically a buyer of commercial property conducts, at a minimum, a Phase I in order to determine the likelihood of contamination. If the results thereof indicate that contamination might be present, then Phase II is conducted in order to determine, among other items, the nature, quantities and extent of the contamination. If reportable level(s) of contamination is/are found, then the parties negotiate its clean up and Seller's ongoing responsibilities to mitigate it in compliance with applicable law. The Phase I is also used to obtain bona fide prospective purchaser protections, and if a buyer qualifies therefor and meets the requirements, then under the federal superfund statute, the bona fide prospective purchaser is not liable as an owner or operator of the site for response costs associated with the cleanup of the site. At a minimum, I would recommend that in purchasing commercial property that a buyer obtain a Phase I in order to be afforded the protections of the bona fide prospective purchaser provisions.
I don’t believe that any disclosures are required by State law, except in residential transactions which are common in most states.
One recurring theme in real estate contracts is caveat emptor or buyer beware. Different states require disclosure of specific environmental issues and only specific issues. Florida has more protections than most states. There can be liability if there is a failure to disclose an item that the buyer felt was material. The Transfer Disclosure Statement requires sellers to give prospective buyers a written disclosure statement of items including possible easements, appliances and structural issues, among others. There is also a natural hazards disclosure statute, lead paint disclosure, known hazardous substance disclosure and neighborhood contamination disclosure. Notwithstanding the above, I recommend hiring competent counsel and doing diligence appropriate for the type of property you are buying.
All readily known conditions that can materially affect the value of a property must be disclosed. The property’s past, current, and desired future usage will determine what regulatory issues/disclosures a buyer should inquire about. First, the buyer should request or provide a sellers disclosure to be completed by the seller. Secondly, the buyer should also understand and request enough time through an inspection period to perform any and all inspections, tests, surveys, etc. to confirm the property’s desired use will be suitable and feasible into the future.