Tax Auctions and Contaminated Properties

[Lawrence P. Schnapf]

Within the last three weeks, I have been contacted by successful bidders of tax lien auctions who unknowingly acquired contaminated property. They thought they were getting a great deal and then learned after being notified they were the winning bidder, learned the sites were not only contaminated but the cleanup was going to exceed the purchase price.

Many of the bidders are new to the US and want to buy a piece of America but are not yet familiar with our environmental laws. Tax auctions are "as is" sales. The local government may not necessarily be required to disclose environmental issues. Moreover, the presence of contamination will not typically show up in title work unless a government entity has incurred costs and filed a cleanup lien on the property. Be sure to evaluate potential environmental issues. At the very least, check state and federal databases to see if the site is listed as a potentially contaminated site. 

Issues to investigate include the current or past presence of petroleum tanks, asbestos, lead and meth lab. For commercial properties, former dry cleaners can be very problematic. has property always been connected to public sewer or did it use septic system that can discharge pollutants into groundwater.  Properties where development has stalled may be in violation of stormwater permit requirements.