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Real Estate Investment Trust (REIT) Pollution Insurance
With the emergence of new environmental regulations and the resulting
environmental case law during the last ten years, obtaining capital
for business transactions from commercial lenders has become a complex
and trying process. Now lenders are forced to evaluate environmental
liability along with traditional factors. In the past lenders could
rely on the collateral value of the property to recover losses when
a loan defaults. Non-lending institutions must factor in the nonexistence
of collateral value in a contaminated property, as well as direct
liability for environmental contamination at properties held after
foreclosure.
The REIT, or portfolio pollution policy, covers unknown preexisting
and new pollution conditions that occur after policy inception. This
policy also provides protection for diminution in real estate market
value of the owned property as a result of an on-site pollution condition.
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