Harris Beach attorney Joseph D. Picciotti presented a webinar on “Managing Liability Risk Facing Buyers and Sellers in Transactions Involving Environmental Concerns” hosted by The Knowledge Group. Joe is the leader of the Environmental Law Practice Group and his practice includes environmental regulatory counseling and litigation, as well as land use counseling and litigation. Joe has considerable experience in representing companies in commercial transactions involving property and facilities that are impacted by environmental matters, including lease and purchase transactions involving such assets.
Key webinar topics included: Early Identification of Potential Environmental concerns; Minimum Due Diligence Requirements: Completion of a Phase I ESA; Identification of Recognized Environmental Conditions; Liability for Contamination Faced by Owners and Operators of Contaminated Property; Phase II Activities, Contractual Terms that Address Environmental Issues; Tools Available to Protect Parties in Addition to Contractual Terms. Joe’s full webinar recording is available on the link below.
The following issues presented and answers were also provided for additional insight and learning.
Issues presented by appraising the value of real property impacted or potentially impacted by environmental contamination. For many years appraising the value of real property which was potentially contaminated proved quite problematic. In fact, appraisers in New York previously treated such properties as “special uses” and attempted to assign a value for the property that did not take into account the contamination, but rather its particular use (landfill, disposal facility). Today, appraising such property has changed significantly, and appraisers now attempt to identify the impact of contamination or of contamination concerns as part of their valuation of real property.
The kinds of penalties and damages a governmental agency may seek against a property owner (or operator) arising from contamination concerns, including mere purchasers of property that were not involved in any events leading to contamination of it. Governmental agencies have broad powers to seek both monetary as well as injunctive relief arising from contamination claims. The NYS Department of Environmental Conservation and the U.S. Environmental Protection Agency may seek an order from a court requiring a responsible party (including owners) to conduct investigations on property deemed contaminated or potentially contaminated, and can also order a responsible party to actually conduct the cleanup. Owners of contaminated property are liable to perform such investigations and clean up even if such owner had no involvement in the events which lead to the contamination. In addition, agencies and other governmental authorities may also conduct investigations and cleanups themselves on such property alleged to be contaminated, and then sue the property owner for the cost of the cleanup.
The limited defenses available to property owners. There are very limited defenses to claims against property owners by government agencies requiring investigation and/or cleanup, particularly those claims against current property owners. Current property owners have few defenses to such claims, and such defenses are basically limited to so-called acts of God, or that all of the contamination was caused by a third party unrelated to the owner. Property owners do have the ability to assert partial defenses to liability for contamination based on the so-called innocent purchaser and bonafide perspective purchased defenses but in order for owners to avail themselves of those defenses, they must take steps prior to the purchase of property to investigate it, and if contamination is found to properly address it. Bankruptcy, depending on the nature of the bankruptcy and when the filing occurred, may or may not discharge certain environmental obligations (an order of injunctive relief may not be a discharge in bankruptcy).
The nature of private party or other claims that can be made against owners or operators of contaminated property. Private claims can range from bodily injury claims allegedly caused from contamination, to property damage claims seeking damages from loss of property value, to claims for investigation of contamination and injunctive relief requiring such contamination be remediated. Natural resource claims and damages claims by government agencies may be pursued based on contamination from one property making its way (through groundwater, soils, etc.) to the property of another , as well as based on claims that contamination from a property has made its way on to natural resources (rivers, streams or other habitats) causing damage to such resources.
Emerging issues related to environmental concerns for real property transactions. In New York, vapor intrusion from the volatilization or potential volatilization of volatile organic compounds in soils beneath occupied structures is a continually emerging issue. Vapor intrusion is a significant concern which has been a focus of the New York State Department of Health (NYDOH) for a number of years. NYDOH has its own guidance that has very stringent requirements (more stringent and thus more protective than EPA) in terms of the need to remediate if there is even a small potential that such vapor will enter into occupied spaces (requiring the installation of a sub-slab vapor depressurization system). DEC uses the NYDOH guidelines regularly as a basis to require responsible parties in environmental matters to install such systems and conduct testing. In addition, the revelations concerning lead in drinking water, mold and asbestos type issues continue to present challenges to sellers and buyers.