Robert Szustakowski, The Lotis Engineering Group, PC

I’ve been bouncing around consulting and within bank environmental departments for about 30 years now. And I have found very few banks consider environmental risks associated with their Facilities Department. I find this odd, as while banks are concerned about lending and/or foreclosing on contaminated properties, they are ignoring potential environmental problems on properties for which they are already liable.


Most bank Facilities Departments maintain the offices and numerous branches of the bank. Beyond the day-to-day of just keeping the lights on and parking lots plowed, this includes lease and purchase/sales negotiations and renovations. All of these items include potential environmental issues that can create liabilities to the bank.


We are all aware of the risks poses by asbestos. Yet on an almost daily basis, I see articles on improper handling of asbestos leading to violations, fines and, sometimes, even jail time.


Asbestos surveys are required prior to virtually ANY building renovation. Period. You cannot assume that due to the age of construction, asbestos is not present. Yes, this is a federal statue. I have had numerous instances were contractors stopped in the middle of a project due to the discovery of suspect asbestos midway through demolition. Beyond expensive change orders, bank renovations that require shutting down a branch require regulatory approval – you can’t afford this delay.

Don’t assume that your architect will take care of this. Ask. Better yet, bring in your state-licensed consultant to work hand-in-hand with the architect. The consultant needs to know exactly what you are doing. Which walls are you touching? Which flooring needs to be removed or drilled into? Are you installing more wiring above the ceiling tiles? You can’t just suggest “give me an asbestos survey.” You will get something, but it won’t be what you need.

Daily Operations

One of the items often overlooked by consultants is the need for Asbestos Operations & Maintenance (O&M) Plans. [Not much money in them.] This again is a federal requirement whenever asbestos (confirmed, suspected or assumed) is within a structure in order to provide instruction to those that work within the building to limit asbestos exposure. While not a significant concern as a lender, it is a concern to a building operator (note operator, not just owner].

The O&M plan starts by identifying the locations of asbestos, typically based on sampling or just assumptions. This is followed by specialized instruction for limiting exposure to asbestos fibers. Contrary to what you might think, some everyday actions may be subject to the O&M Plan.

For example, spray-on asbestos insulation may be present above the ceiling tiles of your branch or offices. While the material may not pose a concern to the customers or employees, as asbestos dust may accumulate above the tiles, there is a risk that any movement of a tile will disturb that asbestos. Under federal law, only licensed asbestos contractors can touch those tiles. So, if a ceiling bulb must be changed or new computer lines must be strung above the ceiling tiles, your staff or maintenance company cannot do this work.

This can get extreme, if asbestos is prevalent. Your staff or maintenance company may not be able to replace a toilet paper roll holder, drive a nail to hang a picture or polish the floor. While many maintenance companies have asbestos licensed staff to handle the minor items, it is your responsibility to identify asbestos present to your maintenance company. While it would typically be up to the owner of the building, your triple-net lease just put you into that role.

It is not necessary to identify every bit of asbestos in the building. Rather, your asbestos consultant can sample for the “usual suspects” and then make assumptions on other materials (e.g., roofing, some floor tiles, etc.) and prepare an appropriate O&M Plan.

Vapor Intrusion

Bank branches, drug stores, fast food restaurants and gasoline stations all seem to like the same properties – those with high traffic, high visibility, easy access and, often, located at intersections. That means that many current bank branches historically included gasoline stations, and the concerns associated with them. Even if your property was not the gasoline station, you are likely located near a current or former gasoline station, dry cleaner, etc.

Up until about 10 years ago, we never worried about this. I have identified many, many actual or potential underground storage tanks (USTs) on bank properties. I have also identified many situations where contamination has or may have migrated onto bank property. We did not care; if we were tenants, even triple-net, we were not liable for contamination from either on- or off-site. If we owned the property, we figured we would deal with the issue when/if it was encountered in the future. [Yes, many branches had old fuel oil tanks that, by law, should have been removed but were ignored.] For example, if we found an old tank during parking lot renovations, we dealt with it then. In one instance, odors entering the building via the drive-through teller sub-grade tubes was addressed by sealing them and putting in overhead tubes.

But vapor intrusion has become a significant issue. [Vapor Intrusion: Contaminants (often gasoline or dry cleaning solvents) migrating out of contaminated soil or groundwater into a building through sumps, floor joints, etc.] Most states now having specific methods to assess whether your building may be impacted by vapors entering the building and have specific, and very conservative, indoor air contaminant action levels, well below what is a noticeable by odors and less than what OSHA may have promulgated for industrial sites. This means that vapors may be entering your building at concentrations considered unhealthy by the local health department, impacting your bank staff, and you don’t know it. As the operator, it is your responsibility to provide a safe working environment to your staff.

This is not to suggest vapor studies are needed at all of your facilities. But you should consider reviewing your files to assess known or suspect vapor intrusion issues. Inexpensive research by your consultant can assist in this. If there are properties that may be impacted, coordination between your consultant, Facilities Department and General Counsel’s Office may be warranted to assess if and how to pursue the matter further.

Facility Sales

Every bank periodically sells properties, be it branches or offices. One of the trends now is the sale/lease back deal, so the bank divests itself of real estate yet maintains the location.
As the seller of the property, never, never, never allow the buyer to have full control over the environmental due diligence. Allow them to complete the Phase I study, but you should have some say in the firm completing the work and you may even want reliance on the report. Do not let the buyer control any Phase II (intrusive) study. If there is a Phase II study warranted, the bank should contract that work with the bank’s consultant, with the buyer’s approval of the scope of work. This way, you control the results. I have too often seen a buyer’s consultant complete a Phase II, which resulted in the need to report results to a regulator, resulting in the owner having to remediate the site. By then, the buyer has walked and your asset is now a liability.

While controlling the study does not negate a legal reporting requirement, it does allow you to fully assess the potential reporting requirements first and ramifications should a report be required. You may want to consider canceling the purchase agreement to allow you to assess the concern at your own pace, not governed by the schedule of any such agreement.

Triple-net Leases

I am not qualified to comment much on leases; I’m not a lawyer. But a triple-net lease should always clearly state that an owner is responsible for any contamination on-site prior to the signing of the lease. Believe it or not, I’ve seen leases put the requirement onto the tenant, regardless of responsibility or when the release occurred.


Banks are also real estate companies, tenants, lessees and lessors. They own, lease, buy and sell real estate. They also house their employees in a variety of locations in a variety of building types. It is important to understand the environmental risks of those roles to reduce liabilities.

About the Author

Bob has been completing environmental due diligence for lenders for 30 years. He has developed and managed environmental programs, as a consultant and bank employee, for some of the largest and smallest banks in the country. He has also devised bank programs for construction monitoring and routine property inspections.