Real Estate Law and Environmental Regulations: How it Affects Property Owners

Environmental regulations affect a growing number of real estate transactions as companies and government entities strive to protect our natural resources and habitats. However, environmental restrictions and regulations can have a profound impact on transactions, leading to negative outcomes for both buyers and sellers. No matter which side of the transaction you are on, it’s important to know the environmental regulations affecting your transaction and what they may mean for you.

Environmental Regulations and Their Role in Real Estate 

Regulations that protect the environment are put in place at the local, state, and federal levels. They strive to protect natural resources that are in limited supply, prevent pollution that can negatively affect residents and visitors, and ensure that human activity doesn’t profoundly affect the environment.

Regulations relate to a number of activities, including those that may affect air quality, increase water usage, change how land is used, and lead to greater waste disposal needs.

On the real estate development side, environmental regulations may limit new construction and renovation projects. Consider the number of new subdivisions and suburbs that have taken shape in recent decades, disrupting natural habitats and killing off local flora, fauna, and animal populations. Environmental restrictions strive to limit, if not reverse, these actions.

Prior to undertaking new projects or making major changes to existing properties, developers must rigorously investigate how proposed changes would affect the environment, how they may limit negative effects on the environment, and whether or not their plans are feasible as presented. They often have to present these plans to local regulatory agencies, address criticism, and take proposed changes into consideration. Anything that could negatively affect the environment must be mitigated to ensure that the damage is minimal.

Real Estate Transactions Affected by Environmental Regulations

It should come as no surprise that environmental laws and regulations can impact real estate transactions. Consider, for example, the sale of vacant land. If that land is part of wetlands or a protected area, the buyer cannot simply purchase it and do as they wish with it. They will be bound by the terms and regulations that the previous owners were. Sellers are obligated to disclose these limitations when they are selling property, as these limitations are likely to dissuade a not-insignificant amount of potential buyers.

When sellers are selling property that is bound by environmental regulations and restrictions, they may find that these limitations affect their selling price and the reach that they have among potential buyers. The greater the restrictions are, the more significantly they may affect the property’s selling price. Buyers may also use these limitations as a point of negotiation, further impacting the selling price.

Property Owners’ Responsibilities and Liabilities

Those who are selling property, whether it’s residential property, commercial property, or vacant land, are obligated to inform potential buyers of the limitations and restrictions that they may face when they seek to develop the property. Consider, for example, a residential easement for a home that is built in an area that is environmentally important to the area. The easement allows for occasional access to the property to test water levels and investigate the growth of native flora and fauna. 

This, of course, means that potential buyers cannot raze that area and use it to build an in-ground pool. Sellers must disclose the presence of such easements and other relevant regulations that may limit buyers’ usage of their property, as such information could influence their purchasing decisions.

Mitigation and Remediation

What about property that has already been negatively affected environmentally? Regulations and restrictions may strive to mitigate these damages. For example, if a subdivision was built and designed in such a way that it damaged local wetlands, owners of these properties may have to take steps to mitigate damages when they make significant updates to their home, add structures to their property, or engage in landscaping that significantly changes the layout of the land.

When you are selling property, it’s important to be fully informed on environmental regulations that you are bound to follow so that you can adequately inform potential buyers. As a buyer, it is crucial to both take on board what the seller says and to discuss any potential limitations with a local real estate attorney.