Phase 1 & Phase 2 - contamination by third party and risks

[John Vanhara]

I am writing an offer on industrial warehouse in Los Angeles area. The area is known for contamination of underground water due to oil extractions & heavy industries. Many transactions come with something found on Phase 1 and Phase 2. Some banks are afraid and immediately refuse financing such deal. Other banks get to know the area. They do their own research and than will lend. It is a long process usually. Usually the Phase 1 names the pollutant (for example Chevron, Hughes aerospace). There are some monitoring wells nearby. The pollution is over the limits for commercial development, but still the life goes on and at the end the transactions happen. The pollution is always from third party like that. And it is being monitored for decades. Very often the pollution levels go slowly down. Sometimes they do not go down. I keep wondering what is the REAL risk in purchasing property like that. Could there be some liability for the property owner even if it is known that the pollution was caused by third party and many years ago. How to assess this? I am currently working on a deal which again has some similar findings on Phase 1 and Phase 2. This time more than what I usually see and keep wondering where to find a good advice.