ENVIRONMENTAL SURVEY UPDATE

Environmental Survey Update Articles

Tenant Environmental Inspections-Critical to Property Success 

More and more commercial and industrial landlords have come to realize that tenant environmental inspections are of key importance, in avoiding surprises at the time of lease termination or at the time of eviction. Companies facing financial difficulties, have higher incidences of improperly storing waste for long periods to avoid costly offsite transportation and disposal costs. In other instances, companies have been found to allow slowly leaking liquids from manufacturing equipment to seep through floors, to avoid equipment repair costs. Due to the cost squeeze now affecting commercial and industrial entities, landlords need to be sure that tenants are not creating or contributing to environmental problems in their demised premises, which will provide a costly surprise to the landlord later.

Many property managers and owners think that lease provisions protect them by prohibiting the storage of hazardous substances on tenant premises. However, the majority of leases used for commercial and industrial space are not enforceable, and, they frequently do not contain any enumeration on hazardous material and waste storage methods, nor specific inspection and spill requirements even though state and federal laws, for decades, have required tenants with more than a few drums of hazardous materials, to have written Contingency Plans in place. In many instances, the plans, if they are present, are not properly implemented, and required inspections are not conducted. The inspections, however, are critical to assuring proper management of hazardous materials and waste, in compliance with federal and state regulations. 

Smart landlords have begun to require independent environmental inspections of high risk tenants, including those involved with dry cleaning, automotive or equipment servicing, and those storing significant inventories of chemicals and other drummed or tanked liquids. An inspection by an independent environmental professional can provide quick information on whether storage and management practices are within industry norms, whether they are in compliance with state and federal and environmental laws, and, whether releases are occurring on the tenant premises, which are likely to require future remediation and expenditure of funds. 

Experienced environmental professionals can help determine whether conditions in individual tenant spaces are or are not something to be concerned about. Where tenants manage significant quantities of hazardous materials or waste, inspections are recommended at intervals of at least twice per year. The independent pair of eyes can help: 

• Determine whether written Contingency Plan is adequate.
• Determine whether the written Contingency Plan inspections are being conducted.
• Determine whether items identified during the in spections are being followed up on.
• Determine whether or not upgraded management practices are needed, either due to the risk involved in managing the materials, or due to the observation of sloppy housekeeping practices, which, if not corrected, will lead to significant clean up costs, at the time of lease termination.

RT has qualified chemical engineers, who can frequently inspect tenant spaces in a few hours, economically. Where new tenants are being considered for a premises and they plan to have significant manufacturing equipment, and/or manage significant quantities of hazardous materials, we can advise landlords and property owners on storage and inspection requirements required by state and federal environmental regulations, which need to be followed. For a free Fact Sheet regarding Contingency Plans, or discuss particular tenant inspection needs, feel free to give us a call at (800) 725-0593. 

NJ OAL LIMITS USE OF THREATENED SPECIES 

In two recent decisions by the Office of Administrative Law, Administrative Law Judges ("ALJ") have disagreed with NJDEP’s classifications of wetlands as being of "exceptional resource value" based upon the agency’s assessment of the wetlands as a suitable habitat for a threatened or endangered species. 

Under regulations, wetlands are divided into three classes, with the exceptional resource value class enjoying the most protection. 

In the first case, the ALJ interpreted the regulations strictly, distinguishing prior administrative precedent that did not require on-site evidence of threatened or endangered species, but rather allowed offsite observation and a connection to the wetlands at issue by certain probabilities of use, on the basis that NJDEP presented no evidence to support that finding. 

The ALJ in the second case overturned NJDEP’s classification where there was no evidence that the endangered wood turtle currently or ever used the site in question, the site was only marginally suitable as a habitat, and a preferable habitat area already existed across a road from the site. Maier v. NJDEP, OAL Docket No. ESA 3740-98 (Oct. 23, 2000). (Riker Danzig Environmental Update - 3/01) 

HERBICIDE PESTICIDE USE ON FARMLAND 

Historical herbicide pesticide use continues to be a problem on a significant number of properties being considered for development. Based on tests at hundreds of properties, we have found that:

1. Lead and arsenic (from application of lead arsenate) can be the most problematic to deal with.

2. Eldrin and dieldrin are also frequently found over state standards in PA and NJ.

3. The majority of properties tested meet all standards, but there is no way to tell without testing. All too frequently, there is no one to interview to find out whether lead arsenate was used as an herbicide/pesticide back in the 1920’s or 1930’s.

4. We estimate that 5-25% of historically farmed properties have localized "hot spots", usually corresponding to low points or drainage paths were sediments aggregate.

5. Less than 5% of sites have major quantities impacted soils. However, if there was extensive herbicide/pesticide use, there can be cleanup costs tallying hundreds of thousands of dollars.

RT has been recommending testing at such properties for several years, particularly when agricultural properties are scheduled for residential development. NJ and PA regulatory officials recommend testing as well. For more information contact Tom Brady at (856) 467-2276 or Walter Hungarter at (610) 265-1510.

ASSESSING THE NEIGHBORHOOD: A GUIDE FOR AVOIDING PROBLEMS FROM NEARBY SITES DURING PROPERTY TRANSACTIONS 

In carrying out many of our recent real estate-based assessments, a common question that has arisen is whether or not environmental problems at a nearby site could delay the property transaction. Specifically, potential purchasers have been asking: Can a significant liabilities be present if I acquire a property next to or near a site with known environmental problems? 

The answer to this question is yes, but with careful study and preparation, this situation does not necessarily undermine the pending transaction. The key to successfully working through "nearby site" issues is to keep in mind the fact that there can be significant risk in acquiring properties adjacent to or near sites with environmental problems, even if those problems are documented and known to be the responsibility if another party. Therefore, as a potential buyer of a nearby property, you must take the proper measures to protect your interest during the due diligence period. 

The presence of contamination at a nearby property can affect the value of your site in several ways. Primarily, there may be direct or indirect exposure pathways by which the contaminants of concern can affect residents or tenants of your site. This can include the presence of active potable or process water wells which allow exposure to the contaminant, or a basement which may have vapors from an off-site volatile contaminant in soil or groundwater, such as PCE or gasoline. Additionally, an off-site impact can often extend onto the subject site above state or federal action levels, which places the owner of the subject property at risk of being involved in the eventual cleanup. Such frightening scenarios, while rare, have actually occurred when the parties responsible for the nearby site cleanup default on their responsibility to complete agency-mandated investigations or remediation through bankruptcy or other factors. 

If you are looking into a property, but are aware of a potential off-site source such as an adjacent service station or a federal cleanup site down the street, you must take certain steps before proceeding with the property transaction to protect yourself. First, you and your consultant should identify the nature and extent of the problems from the off-site source which could represent direct or indirect exposure pathways onto the subject site. This is performed initially through a database screening which is a part of RT's standard Phase I Environmental Site Assessment work scope, but can also be performed separately. Regulatory agency file reviews can also be conducted, which often provide detailed information regarding the nature of investigation or cleanup activities at a site. Once this information is obtained, an assessment of the responsible party's plans and/or ability to carry through the required environmental work should be assessed through discussions with the overseeing state or federal agency. 

These initial steps often lead to satisfaction on the part of the potential property owner, and provide a more solid footing on which the transaction may proceed. If such initial measures are not taken, these issues run the risk of ending up in litigation, to the dissatisfaction of all parties involved. It is therefore best to foresee these potential circumstances early within the due diligence period, and approach them intelligently throughout the transaction process. 

We at RT can help you use these screening tools and our experience to help you identify these problems before they delay your transaction.