Inheriting commercial real estate can turn into a major financial expense should pollution be discovered onsite.

Two heirs to commercial real estate property discovered their windfalls were actually financial nightmares years after the estate was settled. As detailed by the New York Times in the article “Contaminated Property Makes for Costly Inheritance” the people learned that despite not being responsible for the pollution, they were responsible for the cleanup.

In one case a woman inherited a portion of the property from her father. When she and the other owners went to sell the property an environmental report revealed that previous tenants had left behind pollution that would cost millions to clean up.

In the other case a woman inherited property from her father through a trust. Some 25 years after the trust sold the property the woman was named in a lawsuit that claimed pollutants on the property had resulted in illness. The woman won the legal case, but it cost her $500,000 in legal fees.

An important take away from these stories is that neither was responsible for the pollution on the property, but that does not matter. When property is discovered to be polluted previous owners can often be sued and held liable. Plaintiffs usually go after the previous owner who has the most money.

What this means for heirs is that if inherited property could be contaminated, it is often a good idea to disclaim the inheritance as it could cost more than it is worth. However, disclaiming inherited property must be done quickly so heirs should perform due diligence quickly.

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