In a construction financing, the lender will often require the owner of the property that is being developed to have an individual or entity – known as a guarantor – sign an environmental indemnity agreement.
Dennis Sughrue and Adam Hirst's recent article for Real Estate Weekly explores key issues guarantors should consider when reviewing and negotiating such indemnity agreements.
"In these agreements, the guarantor will (a) make certain representations and warranties with respect to the existing environmental conditions at the property, (b) covenant that all activities at the property will comply with applicable environmental law, and (c) indemnify the lender against liability arising from any environmental matters associated with the property, including remediation costs as well as any decrease in the value of the property caused by an environmental matter," the authors explained.
Along with modifying obligations under the indemnity agreement, guarantors are advised to seek out ways to narrow the scope of liability.
Read Sughrue and Hirst's full recommendations in Real Estate Weekly.
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