Negotiating Environmental Indemnity Agreement


In this article, we discuss some of the issues that guarantors should consider when reviewing definitions, representations, guarantees and obligations in a compensation agreement, and propose some options for a surety to limit the amount of compensation in order to better protect its interests. First, the surety should consider ways to revise the key terms defined in the compensation agreement. Finally, the term “debts” should include a complete list of all debts for which the surety is held responsible. Furthermore, the list should not contain any environmental costs, before or after the default, incurred by the lender to assess the ecological condition of the property. The surety should also ensure that no guarantees are given as to compliance with the existing environmental legislation of the property. Three main options are available for compensation in order to limit their liability for environmental compensation. Environmental compensation is generally carried out collectively by the borrower and the surety as a benefit giver and includes insurance and alliances relating to hazardous substances and, above all, from a lender`s point of view, compensation to the lender for any claim or loss of hazardous substances on the mortgaged land. Unless compensation has been negotiated otherwise, compensation will survive indefinitely. Therefore, much of the negotiations between the borrower and the lender involve the attempt to limit the timing of the lender`s claim to compensation.

One of the most important ancillary documents for commercial real estate loans is environmental compensation. Under national and national environmental legislation, a property owner is strictly responsible for eliminating contamination by hazardous substances on such land. Ultimately, environmental compensation is an important document for the lender to protect against environmental risks, but there is room for the lender and the exempt giver to negotiate. The sunset provisions. One of the most common ways for compensation to cancel liability for environmental compensation is by adding a sunset scheme, which provides that after the full repayment of the loan, environmental compensation ends after a certain period of time and after certain conditions have been met. While borrowers often require a one-year sunset, lenders will generally insist that environmental compensation survive two, if not three years after the loan is fully paid. With respect to the conditions that the recipient must meet in order to obtain sunset, the most important condition is that the borrower must submit a clean environmental report, in terms of form and substance reasonably acceptable to the lender, at the time of loans repaid in full (or closer to sunset), so that the lender is sure that there is no current environmental risk. In these agreements, the surety (a) will provide certain assurances and guarantees regarding the existing environmental conditions in the dwelling, (b) will commit to ensuring that all activities of the property comply with the existing environmental legislation and (c) will free the lender from environmental liability related to the property, including the costs of remediation and a possible reduction in the value of the inspection of the environmental property.

Where possible, the guarantor should review the definition so that it contains only federal, regional and local environmental statues. In addition, the definition of “dangerous substances” should be redefined to allow the owner to use hazardous substances in species and quantities normally used in similar properties. Ultimately, environmental compensation is an important document for the lender to protect against environmental risks, but there is room for the lender and the donor exempted from negotiating.