For Attorneys - AskESA
16908
page-template,page-template-full_width,page-template-full_width-php,page,page-id-16908,page-parent,page-child,parent-pageid-17821,ajax_fade,page_not_loaded,,qode-theme-ver-11.0,qode-theme-bridge,wpb-js-composer js-comp-ver-5.2,vc_responsive

For Attorneys

Practical solutions for commercial, industrial,
and residential properties

The vast majority of ESA’s projects revolve around the purchase, sale, or refinance of commercial and industrial properties. Consequently, ESA has an in-depth and intimate knowledge of the real estate process and how environmental issues affect that process. ESA has two goals when performing real estate services: First and foremost, we must always protect the client. Second, environmental issues impede real estate deals, so ESA does what it can to expedite a project so the deal closes as swiftly as possible.

Some of our most commonly requested real estate services include:

Due diligence is one of the most frequently requested forms of environmental service. It is a non-invasive investigation (i.e., no samples are taken) that determines if potential areas of environmental concern exist on an industrial or commercial property. When performing due diligence, each practitioner follows a prescribed methodology to ensure consistent quality between all due diligence assignments and from practitioner to practitioner. Due diligence is normally required by lenders, should always be performed by buyers, and is often performed by property owners as well. There are four basic types of due diligence performed in New Jersey:

 

Site Inspection: This is the least expensive form of due diligence. It involves a visit to the site, an interview with the person most knowledgeable about the property, and a letter-report of findings. This form of due diligence is most often used by lenders who make small loans on properties that are believed to be environmentally benign.

 

Transaction Screens: This form of due diligence is used for properties that are believed to warrant a higher degree of inquiry than a Site Inspection. The Transaction Screen was formerly recognized by the USEPA as a means to qualify for innocent landowner defense pursuant to CERCLA. However, via the proposed “all appropriate inquiries” (AAI) rule, the US EPA has rescinded the ability of the ASTM E 1528 Transaction Screen to serve its purpose: “to permit a user to satisfy one of the requirements to qualify for the innocent landowner defense to CERCLA liability.” Specifically, as stated by the US EPA in the supporting documentation for the proposed AAI law, “The less stringent transaction screen (ASTM E 1528) is not an interim standard and does not meet the requirements for obtaining the CERCLA liability protections.” So what does this mean for the average client who wishes to use this form of due diligence? Not much. Use it if appropriate… but know that it will not provide innocent purchaser protection.

 

Phase I Environmental Assessment: The Phase I Environmental Site Assessment is the standard form of due diligence practiced and accepted in all 50 states. The purpose of a Phase I Environmental Site Assessment is to identify “recognized environmental conditions” in connection with a property. The American Society for Testing and Materials (ASTM) defines the term “recognized environmental conditions” as, “The presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products on the property or into the ground, ground water, or surface water of the property.” The term includes hazardous substances or petroleum products even under conditions in compliance with laws. The term is not intended to include de minimus conditions that generally do not present a material risk of harm to public health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.

 

A Phase I Environmental Site Assessment follows the guidelines established by ASTM E1527-05, and does not include collecting any samples. The need for any additional work (i.e., Phase II sampling) is determined based on the findings of the Phase I. It is important that all readily available environmental reports written for the subject property be reviewed as part of the Phase I. Phase I reports may be needed when one wishes to purchase, sell, or refinance a commercial or industrial property. A Phase I Environmental Site Assessment conducted in accordance with ASTM E 1527-05 is intended to constitute appropriate inquiry for purposes of an innocent landowner defense pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). However, it is not intended that its use be limited to that purpose. Additionally, the USEPA recognizes Phase I assessments following ASTM E1527-05 as compliant with the All Appropriate Inquiries (AAI) regulation and may be used to satisfy the statutory requirements for conducting all appropriate inquiries under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Completion of a Phase I Environmental Site Assessment conducted in accordance with ASTM E 1527-05 will not satisfy the specific requirements of an innocent landowner defense established by the New Jersey Department of Environmental Protection.

 

Preliminary Assessment: This form of due diligence is used only in New Jersey, as prescribed by the NJDEP. It provides the same information as an ASTM Phase I Environmental Site Assessment, and then goes beyond the Phase I. Every Preliminary Assessment must follow the format prescribed in the New Jersey Technical Requirements for Site Remediation (N.J.A.C. 7:26E), which differs from the ASTM format and must compare the results of all past environmental cleanups against contemporary standards. Preliminary Assessments are the preferred form of due diligence when buying commercial or industrial property in New Jersey because they are required pursuant to New Jersey’s Brownfield and Contaminated Site Remediation Act (N.J.S.A. 58:10B-1 et seq.). Additionally, a Preliminary Assessment must be performed to satisfy the specific requirements of an innocent landowner defense established by the New Jersey Department of Environmental Protection.

Phase II sampling is often performed after suspected Areas of Environmental Concern (AECs) are identified during the due diligence process. Sometimes a property owner knows of potential problems and will request sampling to learn more. Sampling results sometimes indicate that remediation is necessary.

 

ESA’s staff uses various methods to collect samples. These include both surface and subsurface sample collection methodologies (i.e., hand-augers, GeoProbe┬«, truck-mounted hollow stem augers, etc.). These services include the installation of groundwater monitor wells and the acquisition of both soil and groundwater samples. Additionally, we can sample hazardous waste from drums, pits, tanks and lagoons, as well as collect wipe samples from interior or exterior building surfaces.

In New Jersey, selling or closing a business, ceasing operations, or transferring a majority shareholder interest could trigger ISRA. If ISRA is triggered, there are a few other criteria that must be satisfied to induce the ISRA-compliance process: You must be an industrial establishment with an applicable North American Industry Classification System (NAICS) number as designated within the ISRA rules; the business must have operated in New Jersey on or after December 31, 1983; and it must involve the storage or handling of specifically defined hazardous substances.

 

If you have an ISRA-subject business, you must demonstrate that your operation has not contaminated the premises or surrounding property. This involves submitting various forms and affidavits to the NJDEP and possibly the acquisition of soil or groundwater samples. Having worked on well over 100 ISRA cases, ESA will get you through this process quickly and inexpensively.

 

Ask ESA if your business is subject to ISRA. We can help determine the applicability of ISRA to your situation. Remember… even if you are a tenant, ISRA could apply.

 

Below are common issues faced by ISRA applicants:

  • Applicability Determinations
  • Expedited Reviews
  • Historic Fill
  • Funding Sources
  • De minimus Quantity Exemptions
  • Preliminary Assessment Report (PAR) and General Information Notification (GIN)
  • Innocent Purchaser Protection

Buyers and sellers of real estate must be alert to various environmental issues. Here are some of the more important issues:

 

Due Diligence and the Site Remediation Reform Act (SRRA): Any due diligence performed under the SRRA must be in the form of a Preliminary Assessment (PA). If any form of due diligence is submitted to NJDEP other than a PA, it will be rejected. Moreover, Licensed Site Remediation Professionals (LSRPs) have obligations to report certain forms of environmental impact. Therefore, buyers and sellers may wish to retain non-LSRP consultants when in the due diligence process. This strategy should be discussed with your attorney and appropriate language written for inclusion in your contract of sale.

 

Innocent Purchaser Protection Under the NJ Brownfield Act: This protects buyers from third-party liability if they should purchase a property that is subsequently found to contain contamination that, during the course of “proper due diligence,” was not discovered and the buyer did not cause. This protection is conferred by New Jersey and the federal government. This protection will not shield a buyer from the cost of remediating such problems, however.

 

Seller-Financed Cleanups: Should a seller go through the time and expense of remediating their property prior to closing? This question has no simple answer. If you want the highest selling price, you may want to undertake the cleanup on your own. The reason for this is that savvy buyers will estimate the cost of remediation, multiply their remedial estimate by 150 to 300 percent, and then negotiate the sale price down relative to their remedial estimate.

 

A Sense of Perspective: Some real estate deals have environmental issues that require attention. Inappropriately, some environmental consultants see their involvement as central to the deal. But real estate transactions are normally led by an attorney. If your attorney is competent, they should direct how the deal is to proceed. They may require input from the consultant, but only in-so-far as environmental compliance is concerned. ESA works closely with attorneys to effect an outcome that makes sense and, most important, keeps the deal moving forward. In short, the less ESA needs to do, the better it is for your deal!

Brownfields are commercial or industrial properties that have been abandoned or are underutilized and (typically) are environmentally impacted or suspected to have environmental impacts. Brownfields can exist in urban, suburban, or rural areas. The objective of Brownfields-enabling legislation is to foster the clean-up of these properties and return them to the tax rolls. Brownfields received their initial impetus from the federal government and now many states have their own enabling legislation. Successful Brownfields programs typically convey to the purchaser indemnities and tax incentives and, if needed, low interest loans. ESA has returned many Brownfields properties to the tax rolls.

 

Here are some key issues you should know about Brownfields:

 

Covenants Not-to-Sue: A Covenant Not-to-Sue is an indemnification granted to the Brownfields developer by the ruling governmental agency that says third parties may not seek claims against the developer for past contamination or acts or practices that led to contamination. The theory behind this covenant is that those investing in Brownfields can be thought of as “white knights” who seek to remediate properties for the purpose of redeveloping and/or selling it. Under the New Jersey SRRA, the Covenant Not to Sue is no longer a separate item, but rather is intrinsic to (and incorporated within) the Remedial Action Outcome (RAO).

 

Tax Incentives: New Jersey and other states now have programs that provide tax incentives in “urban enterprise zones.” In New Jersey, for example, you can receive a graduated 10-year tax deferral for undertaking a Brownfields project in the targeted urban zones. In addition, consider filing a tax appeal at the very beginning of your project. Many developers save significant dollars by appealing their taxes up front.

 

Protection Against Clean-Up Cost Over-Runs: You can protect yourself against cost over-runs that can occur when cleaning up your site. This protection is available as a single-premium insurance product. This typically makes the most sense when your cleanup could exceed $1,000,000.00.

 

Low Interest Loans: Some government agencies have available low interest loans for qualified development projects. Some of this money can be applied against site investigation and clean-up.

 

Municipalities: Municipalities have special rights, privileges, and powers relative to Brownfields. Each municipality should take full advantage of these. By the same token, private developers also need to identify these rights and privileges so they can work more effectively within their municipality. Further, ESA cautions private developers from creating an adversarial position with their municipalities because, if the municipality so chooses, they can use these rights to hamper your transaction. Your host municipality makes a far better friend than enemy.

ESA provides full turnkey remedial design and implementation services. Proper remedial design is needed to effect remediation to an appropriate level. While “the appropriate level” is relative to each project, it usually means designing a program to meet the minimum requirements for compliance so the fewest dollars are spent. Remedial designs include soil excavation and disposal or recycling, soil reuse plans, drum removals (both surficial and buried), groundwater cleanups, lagoon closures, building decontamination (PCBs and other hazardous materials including asbestos), chemical oxidation, and bioremediation.

 

On occasion, projects require a more complicated remedy. For example, when heating oil finds its way beneath a structure, it can present a complicated remedial challenge. New shoring methods have emerged and have gained wide acceptance. These methods include mini-piles and helical piers. When properly designed by a licensed civil engineer, a house (even a very old one) can be supported to allow excavation to occur well beneath the structure. These methods are so secure that most structures experience virtually no shifting. Walls remain plumb and do not crack, and doors still open and close with ease.

 

It is beyond the scope of this Web site to describe in detail the myriad remedial technologies that one can select. When an impacted site requires in situ remediation, ESA must choose from technologies such as bioremediation, bioaugmentation, chemical oxidation, chemical reduction, physical removal, minimization technologies, stabilization, and much more. ESA examines the universe of commercially available technologies and selects the one that lends itself to your particular application. Remember one very important fact: all remedial technologies work, but not all technologies work equally well in every situation. It is ESA’s responsibility to determine what technology is best for your particular site by taking into account the actual contaminants, geology, site constraints, timing, and etc.

Ask our expert environmental consultants for help solving your environmental challenges.