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Sad Tale of a Phase 1

In today's environment a Phase 1 Environmental Study is a requirement in the sale of a business.Blog   Occasionally this may mean a very unpleasant surprise for the owner.

I had a customer who ran a very clean and well managed printing business located in a shopping center and was seeking to retire.  In discussing the sales process he assured me that there were no environmental issues and a Phase 1 would not be necessary. After all he was in a shopping center.  He did not want to spend the money ($2,000 to $3,000) and just wanted to sell the business and retire.

I found a buyer for the business and in the process of negotiating a lease, the landlord demanded that a Phase 1 be done.  The landlord was concerned with the chemicals that were being used for printing.  The Phase 1 was ordered and it came back indicating serious problems in the floor drains and in the adjacent parking area.  How the chemicals got in these places is a mystery.  However, the owner did have a problem employee who was terminated for cause just prior to the testing.

The landlord required that the ground be cleaned, the seller was forced to comply and the buyer found another business.  The clean up cost the seller almost $200,000.  The cost of the clean up forced the seller to work an additional 8 years.  So much for the early retirement! 

Perhaps none of this could have been avoided, but it is a sad story.  All business owners need to be aware their potential exposure in this area and the need to protect their estate from the potential for financial ruin.

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