Managing Lender Liability for Environmental Risks: Due Diligence, Loan Documentation, Workouts, Foreclosure, Insurance
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Real Property - Finance
- event Date
Wednesday, February 26, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will review lender liability under federal and state environmental laws. This program will discuss risk management practices lenders should adopt to minimize environmental liability, how these policies may differ depending on the type of financing transaction and the nature of the loan, and how borrowers may navigate the varying requirements of lenders when seeking loans to purchase properties or refinance existing loans.
Mr. Schnapf primarily concentrates on environmental risks associated with corporate, real estate and brownfield transactions; commercial financing including asset-based lending, syndicated loans, mezzanine loans and distressed debt; and bankruptcy, workouts and corporate restructuring. He has extensive experience with brownfield redevelopment and financing, including representing affordable housing developers and assisting local development corporations or not-for-profit organizations with their brownfield planning programs. Mr. Schnapf also counsels clients on environmental, represents clients in federal and state environmental litigation, enforcement actions, administrative proceedings and private cost recovery actions. He is a past Chair of the Environmental Law Section of the NYSBA, Co-Chair of the NYSBA brownfield task force, and former Co-Chair of the NYSBA Hazardous Site Remediation Committee. Mr. Schnapf is a past Chair of the ABA Section of Business Law Committee on Environmental, Energy and Natural Resources Law and a Vice Chair of the ABA Section of Environment, Energy and Resources. He has also served on a number of ASTM Task Groups, including Chair of the legal subcommittee for the ASTM E1527 task force responsible for the 2013 and 2021 revisions to ASTM E1527 phase 1 standard and was Co-Chair of the legal sub-committee for the ASTM Vapor Intrusion Task Group.
Mr. Ezovski assists companies in creating best practices to manage their risks, with a focus on environmental risk management and remediation on real estate. Before founding ORMS, he served as managing director at Environmental Data Resources, a national environmental information company. His previous experience includes management positions with Marsh USA, where he was an insurance risk management professional; FleetBoston, where he served as the environmental risk manager for the bank’s Small Business Services Division; and Travelers, where, as an engineering manager, he helped resolve complex environmental cases. The author of numerous articles on environmental due diligence and other property risk management topics, Mr. Ezovski played a lead role in developing desktop environmental products that are simplifying the due diligence process for lenders. As a resource to the SBA, he also used his expertise to make due diligence for SBA loans easier to manage. Mr. Ezovski has presented to many leading industry organizations, including the Risk Management Association; Independent Community Bankers of America; Federal Financial Institutional Examination Council; Connecticut Department of Banking; National Association of Government Guaranteed Lenders; and the Environmental Bankers Association.
Federal and most state environmental laws contain secured creditor exemptions that may shield lenders from owner or operator liability for the cleanup of hazardous substances. However, these secured creditor exemptions vary by state and often do not have “bright line” tests for satisfying these safe harbors so lenders may inadvertently fail to qualify for these exemptions and incur direct liability for cleanup.
Lenders face their greatest liability during loan workouts and foreclosures. Besides direct environmental liability, lenders can also suffer indirect impacts such as where a borrower is unable to repay its loan because of cleanup costs or where contamination may decrease the collateral value.
Lenders need to develop environmental strategies to minimize liability. These policies include pre-loan environmental due diligence, environmental provisions in loan documentation including an environmental indemnification and environmental insurance.
Listen as our panel of experts reviews recent lender liability cases, discusses how lenders can tailor their risk management strategies and provides steps lenders can take during each phase of a loan to preserve their secured creditor exemption. The panel will also highlight alternative strategies in case a lender inadvertently fails to satisfy the secured creditor exemption.
- Lender liability under federal and state environmental laws
- Defenses to environmental liability
- Developing appropriate due diligence for the particular type of lender such as balance sheet lenders, asset-based lenders, conduit lenders, non-bank lenders, community banks and lenders participating in SBA financing
- How due diligence may differ for traditional commercial mortgages, CMBS, CLOs, bridge loans, construction loans and SBA lenders
- Negotiating loan documentation, indemnification agreements and other loan documentation
- Best practices for workouts and foreclosures
- Special lender liability rules for underground storage tanks
The panel will review these and other key issues:
- What are the elements of the secured creditor exemption?
- What are the key components of a lender environmental risk management program?
- How to tailor environmental due diligence for a particular transaction, type of loan and property use
- How to use reps and warranties, loan covenants and indemnity agreements to manage environmental risks
- Strategies for minimizing liability during loan workouts
- What types of environmental insurance are available to manage environmental liability?
- Federal and state regulatory initiatives for managing environmental risks
- Strategies for borrowers to help get lenders comfortable with environmental risks at a property
- How lenders can use environmental policies to mitigate risks and how borrowers may use these policies to address lender concerns
