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All Appropriate Inquiry International Right of Way Association Appraisal Institute Federal Agency Update, January 15, 2009 PowerPoint PPT Presentation


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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 Association Appraisal Institute Federal Agency Update, January 15, 2009

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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

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


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 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 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.)


Abandoned

Idled

Underutilized

Commercial

Industrial

Where redevelopment is complicated

Environmental contamination

Perceived contamination

What is a Brownfield?


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.


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


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


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


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


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 products

More Terms and Definitions


The Small Business Relief and Brownfield Revitalization Act of 2002.


Superfund Amendment affording protection to secured creditors that provide financing for contaminated sites

The Small Business Relief and Brownfield Revitalization Act of 2002.


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


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 2002.

  • Petroleum contamination sites are now included as brownfields (were not in the 1997 legislation)


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

  • 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 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 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 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 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 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 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 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 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

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 Defense

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


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

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 Defense

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


Innocent Landowner Defense

  • Appropriate inquiry for this defense is applied on a sliding scale

    ResidentialInspection and title search

    Industrial/Commercial

    ASTM 1527 Phase I

    or AAI


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.


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


The Responsibility is on theProspective Purchaser to perform

“All appropriate inquiry”

The Environmental Professional

can perform part

The owner can perform part

Brownfields Act


1.) The results of an inquiry by an environmental professional

All Appropriate Inquiry (AAI)

NO

YES


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 (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 (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 (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.


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 (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


1966

1950

1929

1966


4.) Searches - recorded environmental cleanup liens against the facility that are filed under federal, state, or local law

All Appropriate Inquiry (AAI)


Physical Setting Map

Detail Map


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


6.) Visual inspections of the facility

and of adjoining properties

All Appropriate Inquiry (AAI)


All Appropriate Inquiry (AAI)

  • 7.) Specialized knowledge or

    experience on the part of the defendant


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 (AAI)

  • 9.) Commonly known or reasonably

    ascertainable information about the property


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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