Series 79 practice questionmediumEnvironmental due diligence – remediation cost estimation
If a Phase II ESA identifies soil contamination that will cost $2 million to remediate, how should this information impact the deal?
- ANo action is required if the contamination is disclosed
- BThe seller’s representations should be waived
- CThe buyer must abandon the transaction
- DThe buyer may seek a purchase price reduction of $2 million or a remediation escrow✓ Correct answer
Explanation
Why D — The buyer may seek a purchase price reduction of $2 million or a remediation escrow
Buyers typically negotiate a price reduction or demand escrow for remediation costs. Waiving representations or abandoning the transaction is extreme; disclosure alone does not remove the need for financial adjustment.
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