Nearly impossible to resell commercial land, advice
A friend and I bought a piece of land two years ago (Sept '16). When we decided to scrap the plan to build, we listed it for sale. We have had a list of buyers, great. However, since Sept '17, we haven't been able to unload it b/c the first buyer did their due diligence and discovered that there was this contaminant.

We knew that the land had been a gas station in the past. But there were no flags. So we bought it. However, the state placed a hold on the land that simply states that no building can be built on it until further tests are done. (It can be used as a parking lot.) Well, we paid $15,000 in surveys and tests (since Sept '17) and though it came positive for contaminants, the surveyors said it is "acceptable/safe but debatable." For the last 6 months, we have been trying to figure out if the state will accept the test and pass it.

My question is: had we known that the contaminant issue was present, we would not have bought the land from the previous owner. Are they liable? We have lost $2000/month in interest costs for the last 6 months plus $15,000 in survey costs (I am excluding the first 12 months of ownership, only factoring in the last several months when we listed it for sale). I am wondering if we can sue for these damages.
[{"id": "e23v8ji", "text": "Depending what the AOS says, but you should of had a due diligence period to inspect the ground etc... if the owner knew and did not disclose that could be another story ", "replies": [{"id": "e23v8y7", "text": "Hey, swaggedoutrealtor, just a quick heads-up:  \n**should of** is actually spelled **should have**. You can remember it by **should have sounds like should of, but it just isn't right**.  \nHave a nice day!\n\n^^^^The ^^^^parent ^^^^commenter ^^^^can ^^^^reply ^^^^with ^^^^'delete' ^^^^to ^^^^delete ^^^^this ^^^^comment.", "replies": [], "depth": 2}], "depth": 1}, {"id": "e23vk9i", "text": "OK the bot Is gone, after due diligence what was in the lease or contract for time to inspect. Its gonna be a shitshow trying to go back over phase one stuff. Basically buyer be ware etc etc", "replies": [], "depth": 1}, {"id": "e23wj5t", "text": "Did you have a phase one and environmental report done when you bought it? Who did those inspections? You may have recourse against them for missing it. Talk to a real estate attorney!", "replies": [{"id": "e240r9d", "text": "&gt; Caveat Emptor\n\nI just spoke with a NON-real estate attorney who has had experience in real estate and in a gas station once before. Basically, he says its a pain in the arse. Secondly, I should done have a Phase I...\n\nJesus, I didn't realize this until you reiterated the Phase I, but we did do a Phase I study a couple of months before we closed. The Phase I, as I just read, focused on the mechanics i.e. \"shear strength and relative compressibility.\" I don't think the Phase I looked into the soil sample for contaminants...?\n\nI will consider a real estate attorney. I contacted the real estate agent and the bank who worked on this deal plus other random ppl who may have some idea about this. Thanks!", "replies": [{"id": "e241hma", "text": "That sounds like it may have been a soils report not a phase I. The first thing they taught us in my real estate classes is to not ever buy a former gas station, dry cleaning store or auto shop or any heavy industrial use without doing a phase I first. You may be able to remediate or get the former gas station to help with cleanup but it\u2019s an uphill battle.", "replies": [{"id": "e24mv28", "text": "as a commercial real estate lender, gas stations are a no-go. also, i get a phase I ESA on everything. you're right, sounds like OP did a geotechnical not a phase I. a phase I would have almost certainly flagged the site with an REC (recognized environmental condition) and recommended phase II for soil/groundwater samples. sounds like someone got in over their head on this one.", "replies": [{"id": "e25y9ol", "text": "How did they get financing without an environmental? They go through everything before they lend.", "replies": [{"id": "e27ml76", "text": "Maybe they bought cash from a bank?", "replies": [{"id": "e27q6ok", "text": "He's complaining that it's costing him 2k monthly.  Who knows", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "e2692vf", "text": "I\u2019m a commercial lender as well. I stay away from RECs like the plague ", "replies": [], "depth": 5}, {"id": "e2jzkx5", "text": "I'm a lender as well and Phase 1 and 2 ESAs are so important. Even if the site has no history of potentially contaminating activities, there may be such activities located off-site and contamination may have migrated on-site! I have seen this before and this is the type of thing you will definitely not know until the ESAs are complete.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e23ymq6", "text": "This is commercial real estate. Caveat Emptor. You might be able to get damages. PM me", "replies": [], "depth": 1}, {"id": "e23ztfz", "text": "I'm going to rule out the possibility that you got environmental insurance during the purchase, right? \n\nYou might be able to get the previous owner to pay under CERCLA, or a similar state statute, but you'd have to be considered a \"bonafide purchaser.\" Did you have a phase I Environmental site assessment in compliance with ASTM standards? Check out this link [about federal CERCLA rules](https://media2.mofo.com/documents/environmentalcounselor0108.pdf). Most states have similar rules for environmental issues.\n\nLimit future liability and make sure no one is trespassing. You are liable for their injuries on your property. \n\nAlso, what's holding up the review by the state? Are you on top of the process there? Might be some bureaucratic lag but if you're on top of your case it hopefully could get expedited so you can get cleared. \n\nMaybe you could sue the environmental inspectors for damages, if any, but I bet the inspectors covered their asses with disclaimers and waivers. Check into that.", "replies": [{"id": "e241lqd", "text": "I was looking for the term \"CERCLA\" but couldn't think until you noted it.\n2) I did complete a Phase I prior to the purchase, so I should qualify as a \"bonafide purchaser.\"\n3) The bureaucratic lag is real in Louisiana. It took them 3 months to get to our Phase I and Phase II paperwork (Yes, I ended up paying for another Phase I study the following year). Then the state's computers went down for 2 weeks. But the survey company was able to have a conversation with them and have been talking with them for the last 3 weeks working out the details. My team says it is safe/acceptable even though it tested positive for contaminants. But between them and the state, its about what is considered an \"acceptable\" amount of contaminants ", "replies": [{"id": "e247wyw", "text": "There's additional requirements for a bona fide purchaser in the link to my last comment so check it out. Best of luck to you!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e2403tx", "text": "You must perform a phase I to qualify as a bona fide potential purchaser under RECRA.  Familiarize yourself with that act.  I\u2019m not an attorney but my understanding is that it was put in place to protect purchasers and provide a route to clean the property and sue the generators/prior owners up the chain of title to recover the cleanup costs.  That said, you have to take proper steps to qualify before purchasing - first step is the phase I.  If you don\u2019t have that prior to closing you are not protected under that act.  I\u2019m not sure whether that\u2019s your only remedy but it\u2019s set up specifically for this situation.", "replies": [{"id": "e2417aj", "text": "We ordered a Phase I (3 months before we closed). As I noted in a previous post, it seemed as if the Phase I focused on the mechanics of the soil (for construction) i.e. shear strength and relative compressibility. There was a soil sample test, but I'll have to review it again to see if they really looked into contaminants.  \n\nI think that Phase I company did ONE boring on a lot that is ~14000sq ft. ", "replies": [{"id": "e24ewgp", "text": "Phase 1 retraces prior uses and determines if a Phase 2 (actual testing and remediation) is required.  Prior gas station shows up in Phase 1 and a Phase 2 wpuld have been suggested.  There is no physical testing in Phase 1 - it's a paper/document search.", "replies": [{"id": "eaj8mz0", "text": "Well, we are re-revisiting the case. \n\n1) There probably was a Phase I done, checking with the agent to see if there is official paperwork.\n2) The issue contaminant issue WAS NOT Disclosed. That's our new counter argument. \n3) The time frame for suing is 1,2 years. We are past the 1 year mark upon discovery of this issue.\n4) I guess this also depends upon the wording of the purchase agreement. Sigh.", "replies": [{"id": "eajilvz", "text": "The state of Kansas has a fund available for gas station environmental remediation.  Covers like 90% of the costs.  You might see if your state has something similar. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "e269ghm", "text": "Again I\u2019m sorry to be the likely bearer of bad news but what it sounds like you ordered is a soils or geotechnical report which focuses on all of the things like compaction that you mentioned. A phase I focuses on previous historical uses and known sources of nearby and related environmental concerns or contamination like gas station uses or underground tanks. A phase I from a competent group would have almost definitely suggested enough concerns to order a phase II which would have bored multiple locations on the site focusing on hydrocarbon and other forms of potential contamination.\n\nSource: I\u2019m a commercial real estate developer and a commercial lender", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e24hf3u", "text": "Did you have a Phase 1 / Phase 2 done prior to purchase? If not, I'm assuming you bought for all cash, because it seems that a bank would require that prior to lending for a former gas station land.\n\nIf the previous owner was intentionally hiding the contamination they may be liable, but if they were unaware, the duty was likely on you to complete your due diligence.\n\nYou are likely going to need an \"NFR\" letter or similar stating that no further remediation is required in order to sell, or you will need to sell at a steep discount with that big unknown clean up cost still in the air.", "replies": [], "depth": 1}, {"id": "e24uhff", "text": "I have no experience with commercial land. But, you say \"For the last 6 months, we have been trying to figure out if the state will accept the test and pass it.\"\n\nWhat is the hold up on this? Is it just hard to work with the state? Your best option seems to be clearing this hurdle and trying to get the acceptable/safe designation where it can be built on.\n\n", "replies": [{"id": "e25g3eh", "text": "Louisiana is the worst. USNEWS ranks Louisiana 51 out of 50 states (based on health care, education, opportunities, etc). So yes, they are slow.\n\n1) For now, to clear the hurdle, we might be able to get the state to clear us \u201cas is.\u201d (Background: From Oct \u201817 to March \u201818, we ended up running a Phase I and Phase II. Then we waited for the state to get to our paperwork, which was a 3 month wait plus 3 extra weeks \u2014 so just under 4 months of waiting for the state)\n\n2) If the state doesn\u2019t pass us, we may have to remediate it and clear out the dirt in that one quadrant. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "e24we2f", "text": "Do you currently have monitoring wells on the site?  It sounds like there was petroleum that got into the ground water.  The environmental company is saying its acceptable/safe but debatable which most likely means the levels are low and the plume is not expanding.  Your state EPA should have a procedure for getting the site off of its contaminated list.  These rules vary state to state.  The site may require further remediation, but hopefully just monitoring.  I'd be happy to take a deeper look if you want to PM me.\n\nDon't worry about what you should have done, that's in the past, focus on how best to either clean up the site or move on from it.", "replies": [{"id": "e25fg0u", "text": "We plan on selling it.\n\nWe can keep it, but we\u2019ll be losing out on $2000/month on interest. And if we keep it, like you said we still might have to remediate it. On the bright side, it\u2019s only part of one quadrant that found contamination. But it\u2019s more expense to clean it up per state. I\u2019ll get my paperwork together (the first Phase prior to our purchase) and PM you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "e24xwgx", "text": "Honestly it sounds to me like you did due diligence but not enough and landed yourself a bad investment. \n\nIf you can find a way to break even or come close to it sell it asap. These lessons hurt but are needed to succeed. ", "replies": [{"id": "e25f159", "text": "We lost a ton of money. So it is an on going lesson \u2014 losing about $2000/month on interest until we sell it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "e250mn8", "text": "Just throwing this out there but have you tried working with a commercial agent specializing in this sort of sale? It seems like you're trying to do the whole deal by yourself for some reason.", "replies": [{"id": "e25eyj6", "text": "We have an agent. And we did due diligence BUT the phase I and sample wasn\u2019t thorough enough. So maybe it wasn\u2019t \u201cdue diligence.\u201d\n\nI will say that (per one Redditor noted earlier) that no one should ever buy a gas station bc it will be contaminated. It\u2019s just a walking headache. But here\u2019s the thing, the previous owner had a car wash on it and it created a facade that all was good.", "replies": [{"id": "e4g9pb7", "text": "This isn\u2019t true at all - \n\nI own a lot that was a gas station with tanks and contamination - it had a corporation commission hold on it until 2001 - it was cleared and allowed to move forward after ground tests came back good.\n\nIf you KNOW WHAT YOU ARE DOING you can make some good moves on stigmatized land.\n\nOP failed to do actual due diligence and instead of owning he likely ordered the wrong test and/or didn\u2019t read it (it sounds like a geo-Tec report was ordered and skimmed through) he continues to blame others.\n\nWhen I hear stories like this I can\u2019t help but feel bad for your self inflicted wounds.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e253svd", "text": "Talk to the DTPA. Deceptive trade practices association and tell them whoever you bought the land from is guilty of concealment. They did not disclose VERY important facts and basically got away with giving you a piece of shitty land. It\u2019s like selling someone a car with all types of engine problems that runs smooth for about 2 hours then shuts off. After selling it they say \u201cno refunds\u201d, which would hold up in court and is actually against the law. Talk to a lawyer because that situation is just fucked ", "replies": [], "depth": 1}, {"id": "e25qlzo", "text": "Look into the PLIRP program and similar programs. They are government run programs to clean up sites like yours. There is a priority list based on degree of contamination and you will likely be low on the list, but it doesn\u2019t matter. There is usually a small deductible, like $500 to $1000. The main thing is to get into a program. \n\nThese programs are designed specifically to make moderately contaminate sites financable, so that you can sell it. The banks will generally finance a site in a program because there is insurance in place to cover their risks. I have been through this process a couple of times. \n\nGet in touch with an environmental engineering company and have them look at the Phase 1 you did and see what you have. If the Phase 1 is fucked you you may have recourse.\n\nTalk to a Board Certified Real Estate Attorney. Not an attorney with real estate experience. Real estate law is based on common law which makes it weird and out of the ordinary. Get a lawyer who really knows their shit. It\u2019s complicated. It is worth the money (A good real estate attorney knows the answers with out having to research it so even though you are paying a higher hourly rate, you are generally paying for a lot less hours).\n\nGood luck to you.", "replies": [{"id": "e29fz50", "text": "If we don't sell, this will be plan B (PLIRP program). And we are debating if we are going to sue. It all depends on how much evidence I gather (so I'll be reviewing the original disclosure statement). Thanks for the input. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "e262grj", "text": "From classes I'm pretty sure that you are liable but may be able to go after previous owners for damages", "replies": [], "depth": 1}, {"id": "e27mceh", "text": "Unless they told you that there were no contaminants AND you can prove that they knew otherwise at the time, they are not liable. That's why people write due diligence into contracts. If everything that was in your contract was fulfilled and this issue wasn't mentioned, than it's irrelevant to the integrity of your purchase.       \n         \nNote: I am a realtor, but not an attorney. There is always a chance that a licensed legal expert local to you may say differently.", "replies": [], "depth": 1}, {"id": "e29lfe9", "text": "When we originally purchased it (2016), our initial Phase I search pulled up [this](https://imgur.com/a/ldRw2S0) . \n\n2) After searching through my emails and checking with the agent, we never received a disclosure statement (we're based in Louisiana). \n\n3) The initial soil sample test was ONLY for mechanical stresses (not contaminants). They drilled two borings at two different depths -- so uh yeah, this doesn't aid my case.\n\n4) In the 2018, we ran another Phase I and Phase II. The second test drilled several borings and only one came back contaminated. Most of the land is safe but in that one part of the quadrant, we have that issue.", "replies": [{"id": "e29lg03", "text": "^(Hi, I'm a bot for linking direct images of albums with only 1 image)\n\n**https://i.imgur.com/tVwaNS2.png**\n\n^^[Source](https://github.com/AUTplayed/imguralbumbot) ^^| ^^[Why?](https://github.com/AUTplayed/imguralbumbot/blob/master/README.md) ^^| ^^[Creator](https://np.reddit.com/user/AUTplayed/) ^^| ^^[ignoreme](https://np.reddit.com/message/compose/?to=imguralbumbot&amp;subject=ignoreme&amp;message=ignoreme) ^^| ^^[deletthis](https://np.reddit.com/message/compose/?to=imguralbumbot&amp;subject=delet%20this&amp;message=delet%20this%20e29lg03) ", "replies": [], "depth": 2}, {"id": "e4g9wmm", "text": "That\u2019s a No further action letter - make the requests to LDEQ - either they screwed up and haven\u2019t pulled it yet or you haven\u2019t gotten them to release it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "e2jriri", "text": "&gt; We knew that the land had been a gas station in the past. But there were no flags. \n\nI own several properties which were utilized as gas stations and/or auto repair shops in the past.  They all had contaminated soil.  Part of the deal when you purchase such property.  Your property being a gas station IS the red flag.  You missed it.  You failed to perform proper due diligence. \n\nPay the money to remove the contamination (and most likely left over tanks).  It is costly, however you will have have more buyers.  Most investors shy away from contamination soil.  One 8,000sqft property I own cost $90,000 to remove four tanks and soil.", "replies": [{"id": "e2jt0ae", "text": "Sigh. No one advised us wisely on gas stations and that\u2019s infuriating. Newb mistake. So it\u2019s a costly missed opportunity and why...I am pursuing my real estate license. \n\nOnly once I was satisfied with an agent and the vast majority i have used (six?) are average (not bad or good, just a body to facilitate the deal). So why not cut out the middle man and be my own boss.", "replies": [{"id": "e2jt8d4", "text": "&gt; I am pursuing my real estate license. \n\nReal estate license is not going to educate you on investment.  A stay at home mom can obtain a real estate license.  Not sure where you are in your life, but if you're serious about real estate investment befriend successful investors in your area.  They will be the best source of insight and education.  Even speaking with commercial load VPs of banks is educational.\n\nGood luck.  ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]