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All Appropriate Inquiry International Right of Way Association Appraisal Institute Federal Agency Update, January 15, 2009. Presented by Richard A. Maloy, MAI, SRA, JD Maloy and Company, Inc. 2212 3 rd Avenue, North Birmingham, AL 35203 800-280-2185 [email protected] Introduction .

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All Appropriate Inquiry International Right of Way AssociationAppraisal InstituteFederal Agency Update, January 15, 2009

Presented by

Richard A. Maloy, MAI, SRA, JD

Maloy and Company, Inc.

2212 3rd Avenue, North

Birmingham, AL 35203

800-280-2185

[email protected]

introduction
Introduction

What is a Brownfield

What the Act means to the real estate world

Obtaining liability protection as a

bona fide prospective purchaser

How to coordinate All Appropriate Inquiry

what is a brownfield
An industrial or commercial property that remains abandoned or underutilized in part because of environmental contamination or thefear of such contamination

http://www.brownsfieldcenter.org/big/glossary.shtml

What is a Brownfield?
what is a brownfield4
What is a Brownfield?
  • Real property, the expansion,

redevelopment, or reuse of which

may be complicated by the presence

or potential presence of a hazardous

substance, pollutant, or contaminant.

U.S. EPA Definition

what is a brownfield5
What is a Brownfield?
  • Abandoned, idled, or underused

industrial or commercial facilities

where expansion or redevelopment

is complicated by real or perceived

environmental contamination. (State of Mass. Environmental Dept.)

what is a brownfield6
Abandoned

Idled

Underutilized

Commercial

Industrial

Where redevelopment is complicated

Environmental contamination

Perceived contamination

What is a Brownfield?
more terms and definitions
More Terms and Definitions

CERCLA - (“Superfund”) Comprehensive Environmental Response, Compensation and Liability Act

CERCLA created a tax on the chemical and petroleum industries and provided broad Federal authority to respond directly to releases or threatened releases of hazardous substances that may endanger public health or the environment.

Congress established the Superfund Program in 1980 to locate, investigate, and clean up the worst contaminated sites nationwide.

more terms and definitions9
CERCLIS - Comprehensive Environmental Response, Compensation and Liability Information System

CERCLIS is a database listing all the sites managed under the CERCLA program

More Terms and Definitions
more terms and definitions10
RBCA (Rebecca) - Risk Based Corrective Action

A streamlined approach in which exposure and risk assessment practices are integrated with traditional components of the corrective action process to ensure that appropriate and cost-effective remedies are selected, and that limited resources are properly allocated.

More Terms and Definitions
more terms and definitions11
RBCA (Rebecca) - Risk Based Corrective Action

The goals of a RBCA process are:

Protection of human health and environment

Practical and cost-effective application of risk-based decision-making

Consistent and technically-defensible administrative process

More Terms and Definitions
more terms and definitions12
Remediation - Treatment or cleanup of a contaminated area.

Voluntary Cleanup Plan (VCP) - State programs where parties may engage in supervised voluntary cleanup of contaminated sites, and, in return receive certain liability protections.

More Terms and Definitions
more terms and definitions13
Hazardous Material - A substance or combination of substances which because of its quantity, concentration, or physical, chemical or infectious characteristics, may either (1) cause, or significantly contribute to, an increase in mortality or an increase in serious, irreversible, or incapacitating reversible, illness; or (2) pose a substantial present or potential hazard to human health or environment when improperly treated, stored, transported, disposed of or otherwise managed.Such as: Perchloroethylene, BTEX, Asbestos, PCB’s and petroleum productsMore Terms and Definitions
the small business relief and brownfield revitalization act of 200216
Creation of liability exemption and EPA enforcement policy not to prosecute owners of land whose groundwater is contaminated from off site sources

Liability exemption for Prospective Purchasers of contaminated sites post 2002

The Small Business Relief and Brownfield Revitalization Act of 2002.

Before

After

the small business relief and brownfield revitalization act of 200217
5. Brownfield exemption for small business and non-profit organizations responsible for only de minimis waste contribution.

6. Issuance of EPA policies for Comfort letters, no further action letters, RFR certifications (ready for reuse) in situations where liability exemption is not available.

The Small Business Relief and Brownfield Revitalization Act of 2002.
the small business relief and brownfield revitalization act of 200218
The Small Business Relief and Brownfield Revitalization Act of 2002.
  • Petroleum contamination sites are now included as brownfields (were not in the 1997 legislation)
brownfields act
Landowners who qualify for liability protection and what must they do to qualify

A) Bona Fide Prospective Purchasers

B) Contiguous Property Owners

C) Innocent Party Defense

Brownfields Act
bona fide prospective purchasers
Bona fide Prospective Purchasers
  • The 1986 Brownfield Amendments had a liability exemption for “innocent landowners” who were able to establish that they purchased property without knowing contamination was present.
  • Practically, purchasers who bought contaminated property also bought into the liability.
bona fide prospective purchasers21
Bona fide Prospective Purchasers

The 2002 Act provides statutory exemption for a new “Bona Fide” Prospective Purchaser of a Brownfield site (both owners and tenants) who satisfy pre and post acquisition requirements. These prospective purchasers are exempt from liability even if they learn of contamination before the acquisition.

bona fide prospective purchasers22
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

It did not cause or contribute to the contamination and that all disposal of all contaminants occurred before the date of acquisition

bona fide prospective purchasers23
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

It is not potentially liable or affiliated with the party that caused or contributed to contamination of the site.

bona fide prospective purchasers24
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

The Prospective Purchaser conducted “all appropriate inquiry” at the time the property was acquired.

bona fide prospective purchasers25
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

The prospective purchaser has taken steps to limit any effects on human health and the environment (participation in a VCP).

bona fide prospective purchasers26
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

The prospective purchaser has cooperated with governmental authorities (for example providing access or providing information when requested)

bona fide prospective purchasers27
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

The prospective purchaser has complied with any governmental agency institutional control requirements (including land use covenants or deed restrictions).

bona fide prospective purchasers28
Bona fide Prospective Purchasers

The Bona Fide Prospective Purchaser must establish by a preponderance of the evidence that:

The prospective purchaser has provided all required notices in connection with site releases.

contiguous land owner defense
Contiguous Land Owner Defense

The 2002 Act exempts a class of owner whose property is or may be contaminated by contiguous or nearby properties. But this exemption exists only to the extent that the contiguous owner was unaware of contamination when it acquired the property.

contiguous land owner defense30
Contiguous Land Owner Defense

The key is that the source is outside of the property.

contiguous land owner defense31
Contiguous Land Owner Defense

Contiguous owners are charged with the same seven requirements that apply to the bona fide prospective purchaser except they do not need to show that the acts of disposal leading to the contamination occurred before the owner acquired the property.

innocent landowner defense
Innocent Landowner Defense

CERCLA was amended in 1986 to exclude from liability, innocent landowners who conduct pre-acquisition appropriate inquiry and do not find contamination which is later the subject of enforcement action.

innocent landowner defense33
Innocent Landowner Defense

Innocent landowners must satisfy the same requirements as the Contiguous Landowner to qualify for the defense.

innocent landowner defense34
Innocent Landowner Defense
  • Appropriate inquiry for this defense is applied on a sliding scale

Residential Inspection and title search

Industrial/Commercial

ASTM 1527 Phase I

or AAI

brownfield tax incentives
Brownfield Tax Incentives
  • Environmental cleanup costs are fully deductible in the year they are incurred

On October 3, 2008, Congress passed, and the President signed into law, the Emergency Economic Stabilization Act of 2008 (EESA) including environmental expense deductibility for tax years 2008 and 2009.

cercla 101 35 2 b ii criteria astm 1527 05 update of astm 1527 00

Chain ofTitle Report

Building Department Records

Sanborn Maps

CERCLA 101(35)(2)(B)(ii) criteriaASTM 1527-05 update of ASTM 1527-00

All Appropriate Inquiry (AAI)

Land Use Records

EPA Records

Previous Occupants

EnvironmentalStudyResults

Purchase Price

slide37
The Responsibility is on theProspective Purchaser to perform

“All appropriate inquiry”

The Environmental Professional

can perform part

The owner can perform part

Brownfields Act

all appropriate inquiry aai39
All Appropriate Inquiry (AAI)

ENVIRONMENTAL PROFESSIONAL

Due diligence investigations, under the All Appropriate Inquiry Rule, must be conducted, for the most part, by an "Environmental Professional". Environmental Professionals must have sufficient, specific education, training and experience in order to develop opinions and conclusions regarding the environmental conditions of a property.

all appropriate inquiry aai40
All Appropriate Inquiry (AAI)

ENVIRONMENTAL PROFESSIONAL

EPA does not license, certify or approve professional certifications by organizations

It is the Environmental Professional’s own determination of whether the competency and experience requirements are met.

It is the client’s responsibility to select a qualified EP.

all appropriate inquiry aai41
All Appropriate Inquiry (AAI)

An Environmental Professional under the Rule includes:

a Professional Engineer or Geologist with three years of relevant experience;

an individual with a scientific degree and five years of relevant experience; or

an individual having 10 years of full-time relevant experience with a college degree.

all appropriate inquiry aai42
All Appropriate Inquiry (AAI)

Importantly, Environmental Professionals will be required to include two statements in their written All Appropriate Inquiry Reports. They must certify that they meet the definition of an Environmental Professional, and that they developed and performed the due diligence investigation in conformance with the standards and practices set forth in the Rule.

all appropriate inquiry aai43
2.) Interview past and present owners, occupants or operators of the facility

Purpose is to gather information regarding the potential for contamination at the property

All Appropriate Inquiry (AAI)
all appropriate inquiry aai44
All Appropriate Inquiry (AAI)
  • 3.) Review historical sources
    • chain of title documents,
    • aerial photographs,
    • building department records,
    • land use records
    • determine previous uses and occupancies of the real property since the property was first developed
slide47

1966

1950

1929

1966

all appropriate inquiry aai48
4.) Searches - recorded environmental cleanup liens against the facility that are filed under federal, state, or local lawAll Appropriate Inquiry (AAI)
all appropriate inquiry aai51
All Appropriate Inquiry (AAI)

5.) Review materials concerning contamination at or near facility

  • federal, state, or local records
  • waste disposal records
  • underground storage tank records
  • hazardous waste handling
  • Generating
  • Treatment
  • Disposal
  • spill records
all appropriate inquiry aai53
All Appropriate Inquiry (AAI)
  • 7.) Specialized knowledge or

experience on the part of the defendant

all appropriate inquiry aai54
All Appropriate Inquiry (AAI)

Unimpaired Value

A

E

Ongoing cost

D

Repair

C

Assessment

B

Discovery

Time

8.) The relationship of purchase price to the value of the property, if the property was not contaminated

all appropriate inquiry aai55
All Appropriate Inquiry (AAI)
  • 9.) Commonly known or reasonably

ascertainable information about the property

all appropriate inquiry aai56
10.) The degree of obviousness or of

the presence or likely presence of

contamination at the property, and the

ability to detect the contamination by

appropriate investigation

All Appropriate Inquiry (AAI)
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