Kings Tire Shop agreed to buy a vacant building supply outlet to expand its tire business. To finance the purchase, Kings negotiated a loan from its bank, with the land and building as security. As part of the loan documentation, the bank required a report stating that the property was not environmentally contaminated in any way. Kings engaged a local environmental consulting firm to investigate and prepare the report for the bank. The firm gave the property a clean bill of health, and the loan was granted. Two years later, it was discovered that the adjacent property, which was formerly a gas station, had seriously contaminated the soil, and pollution was leaching into the soil of Kings’ property. The cleanup cost is significant, and Kings cannot afford it. As a result, Kings’ property is seriously devalued and the bank is concerned about the value of its security, especially since Kings’ business is not doing well. Who is responsible for this environmental damage?
What are the bank’s options?
What are Kings’ options?