Banks Face Environmental Liability with Spike in Unfinished Construction Foreclosures

Banks are foreclosing in record numbers on unfinished construction projects, and many are facing increased environmental liability as a result.

“Banks are not covered by secured creditor exemptions for stormwater and other violations when they foreclose on an unfinished construction project,” says David Roth, a partner in the Environmental and Toxic Tort practice group at Bradley Arant Boult Cummings LLP (Birmingham, Ala.) who regularly counsels lenders on this issue.  “This is even more of a concern right now with increased regulatory scrutiny of environmental compliance in general, and stormwater management in particular,” says Roth.

Roth says it’s important for banks to do their homework before foreclosing on any property, especially unfinished construction projects.

“It is too late to ask questions about environmental liability four days after you’ve taken the title on a property,” says Roth.  “Banks with concerns about environmental issues should meet with regulatory agencies ahead of time to work out an agreed upon schedule on the front end rather than trying to work it out afterwards. In this case, it is better to ask permission than beg forgiveness.”

Roth is available for interviews to discuss what banks need to know from an environmental liability perspective when foreclosing on unfinished construction projects and to write an article on the issue. [07/27/2010]