Environmental pollution clean-up issues to the rescue, sometimes a blessing in disguise for the small business owner in debt trouble.

Its not a common situation but it does happen and when it occurs it can be a blessing in disguise, in the right fact situation. Its the dreaded environmental pollution issue. Under various circumstances, the best being a threat of foreclosure from the bank for a defaulted loan or better yet a defaulted mortgage.

The land or the building you own which is the site for your business has an environmental issue, say a buried oil tank, or a previous leak of fuel or oil that has not been cleaned up, or asbestos in many its different forms, even lead paint can trigger this issue. The simple truth is the business owner may have to pay allot to have it cleaned up but the bank will have to pay much much more, and the business owner is motivated to save its business which relies on the location and property.

The bank has unlimited funds available for a clean up and the business owner has very little disposable capital, thus the price for the business owner will be far less then the price for the bank, and the law requires the site to be cleaned once an environmental issue has been determined to exist. That’s a fact.

In addition, whether or not the bank will pay more or less then the business owner is only one aspect of the problem, the real issue is environmental cleanups cost a fortune and are uncontrollable. Once the clean up begins the invoice is open and know one knows how much it will be but it will be far more then expected and thus typically exposes the bank to far more risk for runaway costs then the defaulted mortgage and the bank is merely looking to recover dollars, while the business is motivated by the fact his business, his life,is part of the real estate.

In fact the bank can hardly escape as everyone in the line of title is exposed to the cleaning up requirements, thus the bank needs to keep the borrower alive and well so the business owner cleans it up, not the bank. If the bank forecloses the bank will be required to clean the environmental issue up. Additionally, the likelihood of a sale occurring in the auction process is slim as the environmental issue deflects interest.

I just had a bank begin foreclosure on a clients real estate because of a defaulted loan, and when I disclosed the existence of the potential, or possibility of significant environmental issues, they dropped the real estate foreclosure issue like a hot potato and wanted to talk about how we were going to clean it up and how cooperative they were all of a sudden going to be.

This has happened far more then once, and thus I say, an environmental issue is a problem but it is also an excellent way to control a foreclosing bank, or the IRS or a law suit judgment, as they do not want to acquire polluted property requiring an environmental clean up. The current owner has the only reason to remain involved in such an issue, it supports his business and thus is important to retain. It is not merely collateral.

Play this card carefully, it’s a tricky issue but can be a valuable wild card. Call for help 413-549-2966