Monday, October 17, 2005

Part IV ... cont - Purchase of business assets including real property - After-treatment measure responsibility under the Swedish Environmental Code

  • As a purchaser of real property you have to safeguard yourself against unwanted and unknown liabilities to the extent possible and you should take the following steps.

  • Carry out a thorough environmental due diligence to ascertain the possible risks of environmental liability resting on the company. This should preferably be done separate from the normal real property due diligence as the investigators called in most probably should have different fields of expertise. I will revert to some questions related to the environmental due diligence in a later post.

  • Provide for a compensation under the purchase agreement from the seller if, and, when, the purchaser is required to undertake and pay for the clean-up and after-treatment measures.

  • However, such a provision is not enough, as the purchaser’s liability is only triggered if the company conducting the environmentally hazardous activities is unable to pay for the clean-up and after-treatment measures. This company will most probably be the seller, and if he cannot pay for these measures he will not be able to compensate the purchaser. Some kind of additional independent guarantee will be need provided by a parent company or a bank or financial institution.

  • The contractual provision will only apply between seller and purchaser. The legal claims under Chapter 10 of the Swedish Environmental Code will still have to be handled and borne by the purchaser.

The next post will cover “Due Diligence investigations related to real property”

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