This article is a “must read” for anyone looking to purchase commercial real estate in New York, or anywhere else in the United States.
On December 15, 2022, the United States Environmental Protection Agency (“EPA”) issued a final rule (40 CFR 312) updating the industry standard for All Appropriate Inquiries from ASTM E1527-13 to ASTM E1527-21 for Phase I Environmental Site Assessments (ESAs). As detailed herein, while ASTM E1527-21 includes some more specific definitions, it also broadens the scope of the All Appropriate Inquiries by including some emerging contaminants within the scope of the ESA.
By way of background, commercial real estate buyers who seek protection under the innocent landowner/bona fide purchaser defense to strict liability (i.e. liability regardless of fault) for environmental contamination under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) must engage in “All Appropriate Inquiries” before closing on the acquisition. Until recently, the EPA accepted ASTM E1527-13 as the industry standard for Phase I ESAs. Among other things, ASTM E1527-13 required qualified environmental professionals to conduct a site investigation, interview someone familiar with the property, review historical property records and conduct other types of investigations in order to determine whether recognized environmental conditions (“RECs”) are likely to exist. ASTM E1527-21 is essentially the updated version or next generation, if you will, of ASTM E1527-13.
Some of the key differences between ASTM E1527-21 and its predecessor are as follows:
- ASTM E1527-21 includes more specific definitions for key terms such as recognized environmental condition, historically recognized environmental conditions, controlled recognized environmental conditions and significant data gaps.
- ASTM E1527-21 states that ESAs must contain certain historical records, a review of additional resources if the property was previously used for industrial purposes; specific photographs and maps; and a review of title records.
- ASTM E1527-21 provides guidance on emerging contaminants such as Per- and Polyfluoroalkyl Substances (PFAS). According to the EPA, PFAS are widely used, long lasting chemicals, components of which break down very slowly over time and PFAS can be harmful to humans. If an emerging contaminant is added to the list of hazardous substances under CERCLA, then said substance must be evaluated within the scope of an ESA. Until that time the emerging contaminant may be considered non-scope.
The new rule accepting ASTM E1527-21 is effective as of February 13, 2023. ASTM E1527-13 will be phased out as of February 13, 2024. Anyone purchasing commercial real estate should consult an experienced real estate attorney to help them scope and execute the due diligence process necessary to protect the purchaser from potential liability under CERCLA.
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