Letter of the law: Nose out the nasty before purchasing property for a veterinary clinic
"Wouldn't I be in a more favorable capital gains position if we scheduled the closing by December 31?" I asked.
"Gee," he responded. "I never think that much about taxes." When I do a business deal, I never stop thinking about taxes. I told him to schedule it for December.The problem is that the world has become too complex to expect a practicing professional to be comfortably familiar with all the elements affecting his or her craft. Professionals and their clients need input from specialists in many areas. And nowhere is this truer than in the realm of real estate law.
When a veterinarian decides to open or move a clinic or hospital, there are a multitude of considerations that need to be analyzed prior to execution of a long-term lease or building purchase. The ones that come to mind first (and that most consultants obsess about) are traffic flow, demographics, visibility, parking and zoning.
But there's an additional legal area that needs careful consideration from a veterinarian and his or her counsel. In fact, the area of environmental law may be the most critical of all in the real estate acquisition decision.
Poor advice or inadequate attention to the laws related to groundwater contamination, vapor migration and other factors could be economically devastating to a property buyer. The purchasing doctor can be left holding the bag for a costly cleanup. His or her estate can be complicated by spills and leaks that occurred prior to ownership. The new owner can even end up paying property taxes indefinitely on land that can't be built on or a building can't be legally occupied.
Avoid tunnel vision
Love and emotion are not limited to residential purchases. They can take hold of commercial buyers as well. When the excitement of starting a practice or moving to a more visible location takes hold, a veterinarian can become overwhelmed with the positive attributes of a building and miss the most important characteristics of the real estate. Lots of traffic doesn't compensate for a declining neighborhood. An upscale neighborhood doesn't make up for the fact that a building lot is in a flood plain.
A veterinarian and his or her attorney need to take a good, thorough look at a potential real estate purchase and identify whether there are any deal-breaking environmental issues. It's critical not to "hope for the best" or "let the person I sell to in 20 years worry about it."
The fact is that environmental law relating to land and buildings can be unforgiving. Depending on jurisdiction, landowners can be charged with responsibility for contamination and toxic materials mitigation in circumstances where they never knew issues existed. They can even be held responsible for cleanup in cases where the property was "clean" at the time of acquisition but subsequently became contaminated through no fault of the owner.
For example, if Dr. Smart spends the time and money to obtain a clean bill of health for the corner lot where he subsequently constructs a veterinary practice, he may later be unable to sell that clinic when a nearby chemical plant closes up shop and walks away from seeping ground contamination.
A subsequent purchaser won't care how hazardous fumes ended up emanating from the basement of Dr. Smart's clinic. She just won't buy the place until Dr. Smart spends whatever it costs to make the problem go away. Of course, Dr. Smart might have a claim against the chemical company for the cleanup costs. But good luck proving the source of the contamination, coming up with the funds to battle the defendant chemical company, and concluding the litigation.