Environmental Aspects of Real Estate and Commercial Transactions

Name: Environmental Aspects of Real Estate and Commercial Transactions | Acquisition, Development, and Liability Management, Fifth Edition
Brand: American Bar Association
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Acquisition, Development, and Liability Management, Fifth Edition

Kevin R. Murray(Autor*in)

American Bar Association (Verlag)

Erschienen am 2. Mai 2022

835 Seiten

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Inhalt

Intro
Title Page
Copyright Page
Summary of Contents
Contents
About the Editor
About the Contributors
Acknowledgments
Preface
Part 1: An Overview of Environmental Liability
Chapter 1: Federal Environmental Liability under CERCLA and RCRA
Liability Arising from Ownership or Leasing of Real Estate
The Comprehensive Environmental Response, Compensation, and Liability Act
The Resource Conservation and Recovery Act
Liability Arising from the Buying or Selling of Real Estate
Liability of "Interim Landowners" and Disclosure of Known Releases or Threatened Releases on Property
Sale of Real Estate as Arranging for Disposal under CERCLA
Conclusion
Chapter 2: Common Law Causes of Action for Environmental Claims
Typical Causes of Action
Nuisance
Defenses
Damages
Trespass
Elements
Damages
Defenses
Strict Liability
Abnormally Dangerous Activity
Illustrative Cases in the Environmental Context
Defenses
Negligence
Elements
Defenses
Conclusion
Chapter 3: State Environmental Programs and Statutory Frameworks for Consideration in Real Estate Transactions
Development of State Programs
CERCLA Preemption
CERCLA Section 128: EPA's General Enforcement Assurances to States to Encourage the Voluntary Assessment and Cleanup of Sites Addressed under State Oversight
State Programs
Voluntary Cleanup Programs
State Hazardous Substance Release Acts (State Superfund or 'Little Superfund' Statutes)
Bona Fide Prospective Purchaser Protection
Lender Liability
State Survey
Chapter 4: Transaction-Triggered Environmental Laws
New Jersey Industrial Site Recovery Act
Subject Parties
ISRA Triggers
The ISRA Process
Exemption Procedures
The ISRA Hammer: Violation and Penalty Provisions
Iowa Environmental Quality Act
Connecticut Transfer Act
Subject Establishments
Triggers
Transfer Act Process
Violation and Penalty Provisions
Covenants Not to Sue
Working Group and Legislative Developments
Connecticut Termination of Operations Law
Oregon Hazardous Waste Removal and Remedial Action Act
Subject Parties and Properties
Trigger, Process, and Penalty Provisions
Michigan Natural Resources and Environmental Protection Act
Subject Parties and Transactions
Trigger, Process, and Penalty Provisions
Ohio Cessation of Regulated Operations Program
Subject Operations and Parties
Trigger, Process, and Penalty Provisions
San Francisco's Ordinance
The Ordinance Process
California Cleanup of Santa Susana Field Lab Law
Delaware Transfer or Closure of Establishments Law
Subject Parties and Properties
Triggers, Process, and Enforcement
Sleepy Hollow's Environmental Protection and Property Reclamation Law
Subject Parties and Properties
Triggers and Process
Exemptions
Enforcement
Washington State Disclosure Law
Triggers and Process
Repealed Transaction-Triggered Environmental Laws
Illinois
Indiana
Hawaii
Related State Laws
Chapter 5: Environmental Release Reporting Obligations
What Constitutes a Release
Regulated Substances and Contaminants
Emerging Contaminants
Case Law Interpreting What Is a Release
Who Must Report?
Federal Reporting Requirements
Statutory and Regulatory Provisions
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) Section 103(a)
CERCLA Section 103(c)
CERCLA Section 103(f)
CERCLA Section 9611(g)
Brownfields Act Sections 221 and 222(a)
Emergency Planning and Community Right to Know Act (EPCRA) Section 304
Clean Water Act (CWA) Section 311(b)(5)
Resource Conservation and Recovery Act (RCRA)
Toxic Substances Control Act (TSCA)
Clean Air Act (CAA)
State Law Reporting Requirements
Other Considerations
Contractual Obligations
Common Law Fraud
Status as Innocent Purchaser
Sentencing Guidelines and Incentives for Reporting
Counsel as Coconspirator
Ethics Considerations
Waiver of Privilege
Conclusion
Chapter 6: Lender and Fiduciary Liability Issues
CERCLA Risk for Lenders and Fiduciaries
General Defense to Liability
Innocent Landowner Defense
Bona Fide Purchaser and Contiguous Landowner
Other Defenses
CERCLA's Lender Liability Provisions
History pre-1992
EPA Lender Liability Rule (1992)
Asset Conservation Act
Participation in Management
Foreclosure and Post-foreclosure Activities
Security Interest
The Lender
Conforming Amendments to RCRA
Remaining Environmental Risks for Lenders
Judicial Interpretation of the Secured Creditor Exemption
Non-CERCLA Assurances for Lenders
Developing a Strategy that Addresses Environmental Risk
Activities before Creation of a Security Interest: Due Diligence
Avoidance of Operator Liability before Creation of a Security Interest
Loan Documentation: Creating the Security Interest and Policing the Loan
Monitoring and Enforcing the Loan
Protection of Collateral: Cleanup Obligations
Protection of Collateral: Notice Provisions
Exercise of Remedies
Post-foreclosure Activities
Solutions: Summary
CERCLA's Fiduciary Liability Provisions
Benefits and Limitations of the Federal Statutory Protections
State Statutory Relief
Measures for Limiting Fiduciary Liability
Environmental Policy
Due Diligence
Leases
Fiduciary Agreements
Insurance Policies
Divestment of Trust Property
Conclusion
Chapter 7: Treatment of Environmental Liabilities in Bankruptcy
Introduction
Environmental Laws
The Bankruptcy Code
Bankruptcy Concepts as Applied to Environmental Claims
Abandonment of Contaminated Property
Effect of the Automatic Stay
Due Process: What Constitutes Sufficient Notice?
Dischargeability of Environmental Obligations
When Is an Environmental Liability a "Claim"? It Depends.
When Does the Claim Arise?
Allowability, Amount, and Priority of Environmental Claims
Pre-petition Settlement Agreements as Executory Contracts
Successor Liability Issues Peculiar to Bankruptcy
Protections for Lenders and Fiduciaries
Insurance for Environmental Claims
Conclusion
Chapter 8: Environmental Criminal Enforcement: A Primer for the Real Estate Practitioner
Introduction
A Brief History of Environmental Crimes Statutes and Enforcement in the United States
Roots of Criminal Environmental Enforcement: How Conduct That Threatens to Cause Harm to the Environment Became a Crime
How Might Criminal Enforcement Impact a Real Estate Transaction?
The Arc of the Deal
Statutes That Can Give Rise to Criminal Liability and Examples of Criminal Dispositions
Is It a Criminal Violation? Factors Distinguishing a Criminal Violation from Civil or Administrative Environmental Violations
Factors that Prosecutors Typically Consider Before Filing a Criminal Case
Additional Considerations: Burden of Proof, Adequacy of Non-Criminal Sanctions and Collateral Consequences-Suspension and Debarment
Recent Developments in Criminal Environmental Enforcement
The Worker Endangerment Initiative and Hybrid Environmental/Worker Safety Suits
Individual Accountability for Corporate Wrongdoing
Evolving Theories of Liability for Corporations and Their Officers
EPA's Current Compliance Initiatives
The Migratory Bird Treaty Act
Conclusion
Part 2: Environmental Due Diligence: Identification of Environmental Issues
Chapter 9: Fundamentals of Due Diligence
Due Diligence Targeting Responsible Party Liability under CERCLA
Landowner Liability Protections: Innocent, Contiguous Property, and Bona Fide Prospective Purchaser Defenses
Definition of "All Appropriate Inquiries"
Phase I Environmental Site Assessments
The ASTM Standards
Beyond the Scope of the ASTM Standard
Case Law Interpreting the Landowner Liability Defenses
Property Purchased Before the 2002 CERCLA Brownfields Amendments
Property Purchased After the 2002 CERCLA Brownfields Amendments
Consultants and Their Role in the Due Diligence Process
Conclusion
Resources
Chapter 10: Environmental Consultants
Selecting a Consultant
The Initial Screening Process
Requests for Proposals and Qualifications
Proposal Review and Consultant Selection
Addressing Contractual Concerns
General Contract Terms
Consultants' Representations, Warranties, and Covenants
Indemnity Issues
Insurance Requirements
Supervising the Consultant
Determining the Scope of Work for the Phase I ESA
Determining the Scope of Work for the Phase II ESA
Determining the Scope of Work for an Environmental Compliance Audit
Establishing the Report Format
Reviewing the Final Report
Understanding the Phase I Report
Understanding the Phase II Report
Understanding an Environmental Compliance Audit Report
Protecting a Report from Disclosure
Attorney-Client Privilege
Other Potential Privileges
Typical Problems Encountered with Reports
Addressing the Consultant's Liability for Work Performed
Chapter 11: Understanding Environmental Reports and Risk-Based Cleanups: Science Issues for Transactional Lawyers
Approaching the Prospect of Phase II Sampling
Evaluating Phase II Sampling and Analysis Plans and Reports
Developing the Sampling and Data Quality Plans
What the Report Should Tell the User
What the Consultant Does in the Field for Phase II
Evaluation of Phase II Results
Common Problems with Phase II Reports
Understanding Environmental Sampling Data and Lab Reports
Sampling
Site Maps
Boring or Well Logs
Chain-of-Custody Records
Laboratory Analytical Reports
Ascertaining the Potential for Migration of the Detected Constituents
Contaminant Categories
Physical and Chemical Properties of Contaminants
Assessing the Risks of Contaminants
Risk Assessment
Contaminant Toxicity
Exposure Assessment
Unacceptable Risk
Target Cleanup Levels: How Clean Is Clean?
Superfund Framework for Establishing Cleanup Objectives
Use of Engineering and Institutional Controls to Mitigate Exposure and Lower Risk
Risk-Based Remediation Relying on Engineering and Institutional Controls
Brownfields and Voluntary Cleanup Program Remediation
Conclusion
Resources
Chapter 12: Non-Scope Items: Asbestos, Lead-Based Paint, and Radon
Asbestos
Regulations
Considerations
Lead
Regulations
Regulatory, Criminal, and Personal Injury Liability
Radon
Chapter 13: An Overview of Institutional Controls
Introduction
Definition of Institutional Controls
Examples of Institutional Controls
Proprietary Controls
State and Local Government Controls
Informational Devices
Enforcement Tools
The Enforceability of Institutional Controls
Degrees of Enforceability
Requirement of Conveyance
Doctrines Limiting Long-Term Enforceability
The Need for an Enforcer
Implementation Considerations
Description of Restricted Activities and Uses
Description of Permitted Activities and Uses
Maintenance Requirements
Subordination Requirements
Disclosure Requirements in Deeds, Leases, and Mortgages
Mechanisms for Modifying or Terminating the Controls
Impact of Noncompliance with the Controls
Whether the Control "Runs with the Land"
Easements
Emergencies
Legal Authority
Public Participation Issues
ASTM and EPA Guidance
Conclusion
Part 3: Issues Related to the Transactional Structure, Tax, and Business Matters
Chapter 14: Structuring the Transaction to Allocate Environmental Liability
Early Considerations
Accounting Considerations
Offer or Letter of Intent Stage
Acquisition Agreement Stage
Pre-closing Diligence
Representations and Warranties
Covenants
Contractual Indemnification
Cost-Sharing Provisions
Miscellaneous Provisions
Other Types of Agreements
Financing Agreements
Lease Agreements
Service Agreements
Side Agreements
Separation Agreements
Institutional Controls
Mechanisms to Structure the Transaction
Transfer of Assets
Formation of a Subsidiary
Limited Liability Company
Limited Partnership
Lease Agreement
Global Transactions
Conclusion
Appendix: Sample Provisions
Defined Terms
Representations and Warranties
Example 1: Asset Purchase Agreement-Shorter Form
Example 2: Asset Purchase Agreement-Longer Form
Example 3: Stock Purchase or Merger-Shorter Form
Example 4: Stock Purchase or Merger-Longer Form
"As Is" Provision for Purchase and Sale of Real Property
Excluded Liabilities Provisions for Asset Purchase Agreements
Example 2
Indemnification Provisions
Example 1: Asset Purchase Agreement-General Indemnification Covering All Breaches of Representations and Excluded Liabilities, including Environmental Matters
Example 2: Asset Purchase Agreement-Specific Environmental Indemnification
Example 3: Limitations on Indemnification
Stand-Alone Environmental Indemnification Agreement
Environmental Remediation and Indemnification Agreement
Lease Provisions
Financing Agreements-Covenants
Example 1: Compliance with Environmental Laws
Example 2: Environmental Assessments
Example 3: Release of Hazardous Substances
Example 4: Reporting Obligations
Chapter 15: Environmental Issues in the Landlord-Tenant Context
Overview of Legal Principles Affecting the Landlord-Tenant Relationship
Overlapping Liability as Owner and Operator
Limitations on the Third-Party and Innocent Landowner Defenses
Risk Shifting through Indemnities
Permitting and Disclosure Obligations
Remediation Obligations
Leases: Negotiating and Drafting to Address Environmental Issues
Issues Relating to the Initial Transfer of Possession
Issues Relating to Tenant's Operation of the Premises
Issues Relating to Lease Expiration or Termination
Conclusion
Chapter 16: Current Insurance Policies for Insuring against Environmental Risks
Introduction
Available Types of Insurance Coverage
Possible Transactional Uses for Environmental Insurance Products
Claims-Made versus Occurrence-Based Coverage
Overview of Available Environmental Insurance Coverage
Pollution and/or Remediation Legal Liability
Cleanup Cost Cap, Stop Loss, or Cost Containment Coverage
Lender Environmental Protection Insurance
Contractor's Pollution Liability and Errors and Omissions Insurance
Finite Risk
Uses of Environmental Insurance Coverage
Additional Security for Contractual Indemnity
Security When No Contractual Indemnity Is Given
Security for Ongoing Manufacturing Operations
Additional Loan Security
Development
Contractor's Work
Government-Led Brownfield Insurance Programs
Massachusetts Brownfield Redevelopment Access to Capital Program
Connecticut Department of Economic and Community Development Program
Wisconsin Department of Natural Resources Program
New York Department of Environmental Conservation Brownfields Cleanup Program
Select Issues to Consider When Evaluating Coverage
Up-Front Premium Payment
Financial Viability of Insurance Company
Developing Case Law Interpreting Coverage
Fact-Sensitive Transactions
Careful Analysis of Terms and Exclusions
Time Frames
Admission of Policies in Various States
Examples of Policy Terms That Require Negotiation
Known Conditions
Insured
Bodily Injury
Property Damage
Underground Storage Tanks, Asbestos, and Lead Paint
Material Change in Use
Intentional Acts
Contractual Liability
Insured's Property
Cancellation
Choice of Law/Choice of Forum
"Other Insurance" Provision
Notice
Subrogation
Severability or Separation of Insureds
No Assignment
Natural Resource Damages
Mold, Fungus, and Microbial Matters, Including Viruses
War and Terrorism
Site Development/Capital Improvements Exclusion
Cleanup Cost Cap Policy
Application Process
Selected Case Law
Conclusion
Chapter 17: Brownfields Redevelopment: Creative Solutions to Historical Environmental Liabilities
Defining the Brownfields Problem
What Is a Brownfield?
Why Are Brownfields Demanding Attention?
Assessing the Barriers to Brownfields Redevelopment
Ambiguous Legal Liability
Lack of Concentrated Expertise
Potentially Substantial Capital Costs
Insufficient Financing
Nebulous Government Policies
Entrenched Attitudes among Regulators
Absence of a Consistent Redevelopment Framework
Public Opposition
Limited Demand for Redeveloped Sites
Competition from Greenfields
Understanding Owner Liability under Superfund
Bringing Down the Barriers
The Brownfields Act: A New Federal Commitment to Brownfields Redevelopment
Summary of the Brownfields Act's Major Provisions
Prospective Purchaser and Innocent Landowner Liability Protection
Food for Thought
Chapter 18: Redevelopment of Environmentally Impacted Real Property Using Tax Increment
General Overview
Use of Tax Increment Solely in Connection with Environmental Remediation
Determination of Amount of Tax Increment
Political and Policy Considerations
Specific Issues Related to Reimbursement Agreements
Comparison of Tax Increment to Conventional Financing
Public Access to Information
Specific Issues Related to Development Agreements
Summary
Chapter 19: Tax Implications of Environmental Aspects of Real Estate and Commercial Transactions
Introduction
Tax Treatment of Environmental Liabilities
General Rules for Deductibility and Capitalization
History of the Tax treatment of Environmental Liabilities
The Modern Rule: Treasury Regulation Section 1.263(a)-3(j) (Treatment of Remediation Costs) and (l) (Adaptation of Land for New or Different Use)
Fines or Penalties
Environmental Tax Opportunities
Energy-Efficient New Homes Tax Credit
Deduction for Energy-Efficient Commercial Buildings
Renewable Energy Tax Credits
Deduction for Contribution of Conservation Easement
Conclusion
Chapter 20: Environmental Disclosure Requirements under Securities Laws
Background
The Statutory and Regulatory Framework
Disclosure of Capital Expenditures: Item 101
Disclosure of Legal Proceedings: Item 103
Management's Discussion and Analysis: Item 303
Climate Change Issues
Proxy Materials
General Disclosure Requirements
Accounting Requirements
Recent Trends in SEC Disclosure Policies
Case Law
Enforcement Matters
Plain-English Disclosure
Conclusion
Part 4: Environmental Issues Specific to Real Estate Development
Chapter 21: Underground Storage Tanks
Background
Environmental Impacts
Federal and State Regulatory Programs
Resource Conservation and Recovery Act
MTBE
Key UST Regulatory Requirements Affecting Commercial Transactions
State Programs
Tools for Resolving UST Issues in Commercial Transactions: Uses and Limitations
State Funds
Environmental Assessments
Contractual Allocation of UST Responsibilities
ASTs: An Alternative to USTs
UST Secured Creditor Exemptions
Chapter 22: Wetlands Considerations in Real Estate Transactions
Introduction
Wetlands Definition, Delineation, Classification, and Characteristics
Wetlands Delineation
Wetlands Classification
Jurisdictional Determinations
The Economic Value of Wetlands
What Activities Are Regulated?
Dredged Material
Fill Material
Statutory Exemptions
Exclusions from the Exemptions
Obtaining Authorization to Discharge Dredged or Fill Material
Individual Permits
Least Environmentally Damaging Practicable Alternative Analysis
Compensatory Mitigation
CWA Section 401 Certification
General Permit Authorization
Section 404(q)
Section 404(c) Veto
States and CWA Section 404
Enforcement
Citizen Suits
Discharges without a Section 404 Permit
Violation of Conditions of a Section 404 Permit
Wholly Past Violations
Liability of Subsequent Owners
Wetlands Subject to the CWA's Jurisdiction
Conclusion
Chapter 23: The Endangered Species Act
Background
Chapter Roadmap
Statutory and Regulatory Overview
Species Listing, Critical Habitat Designation, and Recovery Planning
Take Prohibitions
Section 7 Interagency Consultations
Incidental Take Authorities
The Regional Planning Alternative
Enforcement and Other Programs
Critical Issues for Development
"Best Science" and the Post-Listing Paradox
Defining the Occurrence and Scope of Take
Section 7 Consultations
No Vested Rights
Choosing between a Section 7 Consultation, an Individual HCP, and a Regional HCP
Defining the Type and Scope of Mitigation
Administrative Developments and Reforms
2018 Guidance
Section 7
Section 4(d)
Section 4
An ESA Checklist for Development Projects
Before and during Project Design
During the Authorization Phase
Post-Development
Conclusion
Chapter 24: NEPA and Commercial Transactions
History and Mechanics of NEPA
Categorical Exclusions
Environmental Assessments
Environmental Impact Statements
Supplemental Environmental Impact Statements
EPA Review of an Agency's NEPA Analysis
Judicial Review and NEPA
Litigation Risks and Questions
Examples of Litigation Involving Real Estate/Land-Use Issues
Interactions between NEPA and Other Environmental Laws
NEPA Regulations: 2020 Update
Environmental Effects
"One Federal Decision" Policy and Agency Approvals
Practical Considerations
Conclusion
Chapter 25: Conservation Easements
Conservation Easement as a Real Estate Document
In General
Common Law
UCEA
Federal Statutory Basis: I.R.C. Section 170
In General
I.R.C. § 170
Donative Intent
Partial Consideration
Requirements for Deductibility
Additional Requirements
Mortgaged Property
Third-Party Mineral Interests
Documentation of Condition of Property and Notice of Intent to Exercise Retained Rights
Extinguishment
Compliance
Valuation of Conservation Easement Donations
Federal Gift and Estate Taxation of Conservation Easements
I.R.C. Section 2055: Estate Tax Deduction
I.R.C. Section 2031(c): Estate Tax Exclusion
I.R.C. Section 2522: Gift Tax Considerations
The Conservation Easement
Grantor's Choice of Entity and Timing
Selection of Grantee
Baseline Study/Appraisal
Retained Interests/Permitted Uses
Permitted and Prohibited Uses
Amendments and Modification of the Original Easement
Conservation Easements and Eminent Domain
Federal Farm and Ranch Lands Protection Program
Taxpayer-Friendly Deduction Limitations
Reduction of Federal Charitable Deduction by Allowable State Tax Credits
Appendix A
State Conservation Easement-Enabling Statutes
Appendix B
Permitted Uses and Practices
Appendix C
Prohibited Uses and Practices
Chapter 26: Historic Preservation Issues for Real Estate Development
Introduction
Designation
Federal Designation
State and Local Designation
Effect of Listing and Eligibility for Listing
Local Regulation
Restrictions on Demolition
Restrictions on Alteration
Restrictions on New Construction
Conservation and Preservation Restrictions
Creation
Alteration and Termination
Value of Conservation and Preservation Restrictions
Tax Credits
Federal Rehabilitation Tax Credit Program
State and Local Tax Credits
Conclusion
Chapter 27: Cultural Resources
What Is a Cultural Resource?
Historic Properties Listed on or Eligible for the National Register of Historic Places
Traditional Cultural Properties with Landscape Values
Cultural Resources in the Broader Context
Statutory and Other Protections for Cultural Resources
The National Historic Preservation Act
Other Federal Consultation and Cultural Resource Review Obligations
State and Local Approaches to Protection of Historic Resources
Best Practices for Addressing Cultural Resources in Real Estate Transactions
Chapter 28: Smart Growth and Sustainability
Introduction
Smart Growth
Smart Growth Initiatives at the Federal Level
State Level Smart Growth Policies
Regional Coordination of Smart Growth Policies
Local Level Smart Growth Policies
Sustainable Development
Building Rating Systems
Federal Initiatives to Improve Building Performance
State and Local Initiatives
Property Assessed Clean Energy (PACE) Financing
State and Model Energy Codes
Green Leases
Conclusion
Chapter 29: Environmental Justice and Transactions
Introduction
Defining Environmental Justice and Background
Defining Environmental Justice
Background on Genesis of the EJ Movement
Legal Authorities
Civil Rights Laws
Environmental Laws and Authorities
Applications of Legal Authorities
Siting
Environmental Permitting
Planning, Zoning Law, and Programmatic Efforts to Address EJ Issues
Policies and Rules
Determinations of Need
Existing Facilities
EJ Issues in Transactions
Conclusion
Index

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