13 Apr 2010

Considerations for Foreclosure on Properties with USTs

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In Michigan, taking title to properties with underground storage tanks can be challenging due to a myriad of requirements that a lender must satisfy in order to protect itself and due to conflicting rules and time constraints. Planning becomes critical.

In an ideal situation, the lender performed a Phase I environmental site assessment (ESA) prior to loan origination, the USTs were noted to be in good shape and UST system insurance was in-place. The lender made sure that it was a named as a certificate holder on the UST system insurance so that the lender would have been notified if the insurance was changed or cancelled during the life of the loan. Heading into foreclosure is simplified.

In a less than ideal situation, neither lender nor borrower was aware at loan origination that there were USTs on the property. Or perhaps, the lender did not perform a Phase I prior to loan origination and the USTs have not been properly maintained. These situations are difficult to work through.

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