Environmental Compliance And Indemnification Agreement

In such agreements, the guarantor (a) will provide certain assurances and guarantees regarding the existing environmental conditions in the property, b) undertake that all activities on the land comply with applicable environmental legislation and (c) exempt the lender from liability arising from environmental issues related to the property, including renovation costs and any depreciation of the property due to an environmental issue. The guarantor may limit its liability by inserting exceptions specific to its activities, including any information contained in the environmental reports made available to the lender. As is customary in indemnification agreements, the guarantor should continue to try to qualify his insurance as „real knowledge“. Declassification rules. Since the standard form of environmental compensation persists indefinitely, the person subject to compensation, in the event of enforcement, would still be held liable to the lender for environmental liabilities resulting from such seizure when the borrower no longer owns and controls the immovable property. It is understandable that the person liable for compensation does not want to be held liable for the actions of a third party after leaving the property. However, the mortgage lender should not be released because the mortgage remains in arrears and the mezzanine lender then controls the mortgage borrower. In addition, the guarantor should consider modifying its obligations under the compensation agreement. In particular, commitments should be limited to those „required or invoked by the guarantor“. One of the most important subsidiary documents when it comes to commercial real estate loans is environmental compensation. Under federal and Länder environmental laws, a property owner is strictly responsible for remediation of contamination caused by hazardous substances on such land.

When a lender lends money for a real estate transaction, the lending company must consider potentially dangerous environmental conditions in or on the secure real estate. Often, lenders enter into environmental compensation agreements that define the risk allocation of these conditions. . . .