Pond Boss Forums POND CONSTRUCTION Selecting a site Beautiful 5-acre lake for $1.

This isn’t a misspelling; I really have an option to buying a 5-acre lake for $1. When I found out about this lake, my first question was “what’s wrong with it?” The answer is plenty.

This is a water retention lake located in an industrial park at Tea, SD, which is a suburb of Sioux Falls. The owners have tried to give it away to SD Game, Fish and Parks but they didn’t want it. The Tea FD didn’t want it either nor did the village. They tried to give it to some other organizations but no one would take it. This got my attention. A person can buy a lot of trouble for $1. These are some of the things I’m working with before I actually sign the papers.

This lake is on 6 acres of land however there isn’t any place to park. This extra acre is just shore land. There are streets on the north, west and south sides of the lake. I might be able to get the south street to be abandoned and added to this property. If I can do this, that would give me a parking area. This must occur before I sign the papers.

SD Fisheries surveyed this lake two years ago. They found that it was 8 feet deep at its deepest and that most of the lake was 1-4 feet deep. This lake was originally 13 feet deep so this shows a great amount of siltation. This area has a very high water table so probably won’t dry up or winter kill. However, it is impossible to fish from shore. I would have to dig out the lake to make it useable. The village and county are all for this. Unfortunately, the developer’s covenants on this industrial park forbid this. I have to get permission to dig out the lake before I sign.

The covenants were written with the commercial property in mind. No plants over 18 inches are allowed. Hard to believe but most trees, shrubs and wetland plants are over 18 inches. Again, I have to have an exemption to these covenants before I will sign.

SD Fisheries found that this lake is full of green sunfish and black bullheads. There’s no way of eliminating these fish so I will have to overstock predators to control them.

There is a large amount of fertilizer runoff into this lake. I can’t control this so will have to manage it. If I can get the lake dug out, I will have to add a great deal of aeration.

SD Fisheries didn’t check the water for contaminants but it is likely that the fish in this lake will in inedible in any amounts. That means complete catch and release, which is what I’m doing with our current lake.

The very first thing, as anyone in real estate will tell us, is to get a clean title and warranty deed. We’re in the process of doing that now.

I still don’t know about insurance or the restrictions I might run into with insurance. I still have to find out about this.

We might have to have a chain-linked fence around this property. 3,000 feet of chain link is a lot of money.

We have groups fishing our current lake 5-6 days a week. The reason I’m looking at this lake is to take some pressure off our current lake. This new lake would be used for kids, elderly and handicapped fishing the same as our current lake is. Also, this lake wouldn’t be open to general fishing but rather would be in organized groups only.

Lastly, I’m retired and look at this as a challenge to see if I can take something that no one else will touch and do something good with it.

Any cautions, things that I might have missed or other ideas would be more than welcome.

What would the property taxes be like in SD?

Have you gotten any estimates on the cost of digging the lake deeper?

Liability Isurance could be a huge issue.

? How would ever control access in it? Fences don't work.

Norm :

Be very careful. If you have any ownership interest in the property you will probably become liable for all the contamination that may be there. If it is in or near an industrial park that may well be the reason no one wants it. I have seen people become liable for millions of dollars to clean up costs on a $5000 to good to pass up piece of land. There is no insurance for this that you can buy. If the soil from the pond bottom is contaminated you can't dig it out and move it except to a waste landfill (very very expensive). Check with your DEQ and those who did not want it and find out why. You need legal advice from a good natural resource lawyer first.

I second ewest's caution. Past contamination of the water could be a nightmare; problems with contamination in the future are probably less likely than they used to be but can't be eliminated.

I'm sure a lot of Superfund site owners would have liked to get rid of their property for $1. Look at all the groups that have passed on this already.

The winner of this challenge will certainly be the informed individual.

Many times when there's a piece of property that needs to be unloaded, you can extract a lot of favors from the municipality such as No Tax for 10 years, as well as other creative things.

However, it could be an opportunity of a lifetime, but you need more time to investigate.

I suggest trying to make a simple agreement to take the property off the market for "X" amount of days, for a sum of say $50 or $100 bucks. If you decide not to buy the property, they keep the money. If you buy it, the money goes to them, and you kick in one dollar more.

This way, you preserve your opportunity while
giving you the necessary time to investigate.

EDIT: In real estate, this is similar to an Option Agreement. However, there is no need to call this an Option. Just call it an agreement to take the property off the market for some period of time.

You may want to form a non-profit corporation that owns the property and you control the corporation. This will at least provide some liability shield if stuff happens. You can usually set this up for $50 or get a lawyer to do it for $500.

This may be a perfect situation to form an LLC. If you can gather a couple of pals that you trust and can work with, you can develop the property as a private preserve and protect your other assets by forming an LLC with this group. There is a 450 ac pc across the road from our project that is owned by a group of guys that all own a percentage of it as a private hunt club and they formed it under an LLC. I believe it also creates a tax shelter for improvement write-offs.

There is no such thing as a free lunch. Had this been a good deal, local insiders would own it.

Norm :

LLC's and c-corp.'s are good but not really a good answer for CERCLA liability as ther are many ways to become a PRP.

Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), those who can be held liable for the costs of responding to a release or the threat of a release of hazardous substances are considered to be PRPs. PRPs are defined as:


Current owners or operators of the facility or vessel;

Former owners or operators of the facility or vessel, if they owned the property at the time of disposal;

Those who arrange for treatment or disposal of hazardous substances at a facility (in most cases, the generators); and

Transporters of hazardous substances who selected the disposal site.

CERCLA liability is retroactive, meaning that parties may be held liable for releases that occurred prior to the enactment of the statute in 1980. For more information about Superfund site cleanup liability, see the Compliance and Enforcement Web site.

spoken like a Philadelphia lawyer...good input. Thanks, Ewest.

I should have stated that Brettski is correct that LLC's and Corps. should be used to limit liability but that there are many other ways that one can still be liable under CERCLA. Further that the rules are very expansive and tricky.

There are at least two types of liability for the owner of contaminated property (cleanup and due care)

The way to eliminate liability for CLEANUP is to perform the necessary inquiry. "EPA's new "All Appropriate Inquiry" rule, which goes into effect November 1, 2006 will elimiate liability for those puchasing contaminated property provided that they retain an environmental professional and complete the necessary process. The rules are created to allow the redevelopment of contaminated properties. Many if not all States have their own laws that preceeded the Federal Amendment to CERCLA (Superfund). The first step is to complete the Environmental Site Assessment (approximately $1,500 to $2,000). This report would likely conclude that sampling is necessary to assess water/sediments/soil for contaminants. The sampling and additional reporting could run another $5,000 to $10,000.

The second type of liability on contaminated sites is commonly called DUE CARE. This is the responsibility of the property owner to protect the public from unacceptable exposures. While a new owner may not have cleanup liability it is their responsibility to manage the property in such a way that the conditions are not exacerbated or create exposure hazards. This is not typically a problem on an urban site where a new building/parking lot will form a seal and create a physical barrier that prevents exposures. The owner generally just needs to notify contractors of the hazard and manage any soil or groundwater that is disturbed.

If the lake you are looking at is indeed contaminated, I could see "due care" requiring that you undertake measures to prevent contact with the water, sediments, fish, etc. This includes trespassers and could actually be extended to wildlife. In addition, it is likely that any dredge material removed from the lake would need to be tested and disposed in a landfill.

Most of the brownfield work that I do is paid by state and federal dollars that are available to local governments in order to encourage redevelopment. The buyer generally doesn't pay the bill. If local brownfield dollars were available, maybe you could end up with a clean lake for the cost of managing the project. This is unlikely because generally funding is based on the creation of new jobs and future tax revenue, which does not appear to be in the future of this property.

I'm continually amazed by the information posted on this forum. Thanks to all.

Norm sounds like a deal to good to be true...proceed with caution. looks like those on the board have passed sound advice. i have worked extensively on EPA sites and cleanup is unimagineably expensive. Please use your good judgement to ensure that what you bargain for is what you get, your in the best position to know the parimeters of the contract!!!

Great info Steve, thanks for posting!!

I second Don's comments. Most CERCLA sites are not brownfields. If you can go through the brownfield process as per Steve's post (great post and info) that may well work but it is not easy or cheap if you have to put up the $ as Steve noted. Most sites don't work that way as often the current owner doesn't want anyone doing tests for which he may be liable and no one wants to be a PRP if EPA or a state DEQ becomes involved. Steve's post was how to do it from a redevelopment angle. Unless I knew in advance that a brownfield was available and paid for by someone else then it should be approached from a liability avoidance point of view.

Guess I should have summarized better. I'm in total agreement with Don & Ewest. Here are a few more thoughts for a Saturday morning.

If the property is contaminated, you could pay to complete the "All Appropriate Inquiry" work and completely imdemnify yourself from cleanup liability under Federal Superfund and state Superfund regs and and still find yourself in trouble with other regulations (i.e, Hazardous Waste, Clean Water Act, etc).

The Due Care requirements alone would steer me clear of this property if it is contaminated. The trick would be to find out if it is cotaminated without spending any money. Thats why I brought up the brownfield angle, which was indicated as being a longshot at best. Remember that if there is environmental data available, the owners have the responsibility to disclose that information.

One source of free information is to submit a Freedom of Information Act request to the DEQ office in that district. This is where an environmental professional would always start. You will be able to review files on all of the nearby properties that have documented spills, releases, etc. You will need to determine the names and addresses of the nearby properties for the request. I would include everyone that has a connection to that basin, and all the adjacent properties and any that you know are hydraulically upgradient. If there are a number of known contaminated sites in the vicinity you can probably conclude that those contaminants have found their way to the basin. You will also learn what the potential contaminants are. Talk to the DEQ and ask them if they think the basin is contaminated. The only charges you would have are copy fees.

You could approach the seller and tell them your interested but need some environmental information before you can consider going further. Three or four sediment samples and a water sample would provide a good initial screening. If they were analyzed for metals (arsenic, barium, cadmium, chromium, copper, lead, manganese, mercury, nickel, selenium, silver and zinc), PCBs, volatile organics, and polynuclear aromatics you would be looking at $400/sample plus labor to collect the samples). See if they are willing to pay for that. Like Ewest indicated, sellers are reluctant to generate information that is potentailly damaging. There is no way their attorney would allow them to agree to this but they may be at the point where they feel that sampling is inevitable.

We are only assuming that its contaminated with good reason, but people may not be interested because it is only a pond with no land that can be developed.

It is a simple fact at least here in Michigan that no commercial/industrial property ever gets sold without the appropriate inquiry. Unless of course it is sold for $1.

Great post Steve. I knew what you were saying with your first post. This one takes the next step in the process. It is sure worth checking on just be careful and get advice along the way. If it turns out questionable then walk away.

You could form an LLC or other type of Corp. to buy it, that at least would protect your personal assets. I did mine for $1,000.00 here in PA for my business and I sleep a whole lot better at night.

And as a Corp, you might free up some money from Uncle Sugar for improvments. Should TSHTF, disolve the Corp. and wave bye-bye.