The key aspect of a land lease arrangement, from
an environmental liability point of view, is that the owner is ultimately
responsible for the environmental condition of the property. It
is therefore critical that the owner be aware of the environmental
condition of the property prior to tenant occupancy. Likewise, a
tenant desires knowledge of pre-existing environmental concerns
in order to avoid being held liable at the end of the lease period
and to ensure safe working conditions.
The environmental liability assessment conducted at the start of
a lease usually takes the form of an Environmental Baseline Study
(EBS), intended to document a “snapshot” of the environmental
condition of the property at the time that control of the property
is transferred. The execution of an EBS usually involves a variety
of assessment techniques, including intrusive testing, groundwater
and surface water testing, waste management reviews, and monitoring
of environmental control systems.
As part of the EBS, current practices on the site are audited for
compliance with applicable environmental regulations and guidelines
in order to assess the potential for activities to cause future
liability. The audit process also serves to identify opportunities
for the development of management practices that reduce the risk
of future environmental impacts.
At the end of the lease period, a similar study is undertaken to
produce an “exit snapshot” of environmental issues,
and a basis for determining if significant changes have occurred
to the environmental condition of the property through the course
of the lease.
No specific regulations are in place to dictate the form of an
EBS. The scope of the study is based on industry standards, as well
as the specific requirements of the affected parties, their financial
institutions and insurance providers.