An Environmental Compliance Checklist for Real Estate Practitioners

• Publication year: 1996
• Pages: 61
• Citation: Vol. 25 No. 1 Pg. 61

25 Colo.Law. 61 Colorado Lawyer 1996.

1996, January, Pg. 61. An Environmental Compliance Checklist for Real Estate Practitioners

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Vol. 25, No. 1, Pg. 61

An Environmental Compliance Checklist for Real Estate Practitioners

by Roberta L. Ringstrom and Paul G. Anderson

As many real estate practitioners have learned, environmental contamination of real property can undermine a potential sale or use of that property. The impacts caused by past uses of property, particularly industrial or commercial sites, sometimes are not apparent pollutants generated from past site activities quite often are not discovered until a property assessment is performed as part of a sale, refinancing or capital improvement loan process. Unimproved properties found to be contaminated known as "brownfields," may become stigmatized on the real estate market, reducing their resale value and limiting their possible uses. Potential environmental liabilities also may be associated with existing real property improvements, such as commercial office buildings and manufacturing facilities

This article identifies for real estate practitioners some environmental issues that may apply in real property transactions. Steps that can be taken to eliminate or minimize current and future liability also are reviewed.

Environmental Considerations

Superfund/CERCLA

The "Superfund" statute(fn1) is perhaps the best known among the federal environmental laws. Its broad liability scheme(fn2) can result in a potentially enormous expense for current property owners and unsuspecting purchasers.(fn3) Such liability can be imposed even when no contamination has in fact occurred to the property, as long as a significant potential for contamination exists that causes someone to incur "response costs" to contain this threat.(fn4)

The defenses to Superfund liability are limited and narrow.(fn5) The potential consequences associated with Superfund liability for current and prospective property owners are significant. Thus, it is incumbent on current owners and prospective purchasers to assess existing property conditions to uncover potential Superfund liability.

RCRA

The Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 ("RCRA"),(fn6) also may have significant implications for current and prospective property owners. If the property has been used at any time for solid waste disposal or for hazardous waste disposal, storage or treatment, contamination could be present that "may present an imminent and substantial endangerment" to public health or the environment.(fn7)

As with Superfund, past and present owners or operators of the property can be held liable if waste disposal or treatment activities occur during their ownership which result in a violation of RCRA.(fn8) Before a real estate transaction is consummated, some inquiry into prior site activities is critical.

TSCA and OSHA

The Toxic Substances Control Act ("TSCA")(fn9) focuses on the production, registration and export of chemical substances and mixtures and regulates their manufacture, processing, commercial distribution, use and disposal. TSCA-regulated substances may have been used, stored or manufactured at a particular site in the past, even if there is no apparent evidence of accidental spills or mishandling. TSCA also regulates dioxin, a poisonous impurity present in some herbicides, and polychlorinated biphenyls ("PCBs"), which were historically added to oil in transformers and capacitors to increase heat resistance. TSCA also recently began addressing lead-based paint found in residential buildings and other structures.(fn10) Recently promulgated regulations pursuant to the Occupational Safety and Health Act(fn11) address control of asbestos in commercial buildings and employee exposure to asbestos.(fn12)

For properties that have buildings or other structures, some inquiry into original construction and subsequent maintenance records would be appropriate to guard against possible liability under these laws.

Other Common Environmental Issues

Asbestos: Asbestos use in commercial building products (for example, ceiling and floor tile, cement pipe and water pipe insulation) began in the early 1900s and was common for many years. Airborne

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releases of asbestos can cause debilitating diseases known as asbestosis (a scaring of lung tissue) and mesothelioma (lung and stomach cancer). Asbestos removal and disposal are regulated principally by state air quality requirements,(fn13) while federal requirements address asbestos...