For some brokers, brownfields are part of their daily life, but for others it’s a term that is a vague memory from studying for their realtor license. Here are some Brownfield basics: a reminder of what they are and some things to be aware of on either the seller or buyer side.
A brownfield is property (with or without improvements) that has real or perceived environmental contamination, usually from previous industrial or commercial use. The EPA defines a brownfield as, “A property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.”
Special Concerns for Buyers
Buyers may want to ensure they qualify for Bona Fide Prospective Purchaser Protection (BFPP status), which protects them from CERCLA/Superfund liability where the EPA could pursue them for cleanup costs for previous contamination.
They will need to meet the following criteria for this status initially.
- Contamination occurred prior to purchase. Purchase must be after January 11, 2002.
- Conduct “all appropriate inquiry” prior to purchase to document the historical and current environmental conditions. This is usually in the form of a Phase I Environmental Site Assessment.
- Not be related in a business, familial, or financial sense to anyone potentially liable for contamination.
- After the purchase, there are continuing obligations to maintain this status including ongoing oversight, taking reasonable care to stop and prevent potential or continuing release of contamination and to prevent human exposure, compliance with institutional controls and use restrictions, and ongoing cooperation with authorities, including providing requested information and notices.
State laws vary in their requirements for similar protections under their statutes.
Many buyers feel reassured by “No Further Action” (NFA) letters, which specify what issues (e.g., soil, groundwater, subsurface vapors, and/or sediment) have received approval for closure by the regulatory agency. These NFA letters should be reviewed carefully for areas that still have use restrictions/limitations, remaining remediation requirements, or constituents present that might not be part of the NFA. Be aware that these letters normally have “re-opener” clauses that allow the agency to re-investigate the site and order additional remediation actions to be taken if new health risks are identified.
Special Concerns for Sellers
With a Brownfield, the main concerns for an owner typically revolve around addressing ongoing environmental liability, solving cash flow issues, and feeling certain of the buyer’s ability to close on the transaction and to resolve the complex environmental remediation issues onsite. Corporate owners often want to free up balance sheet reserves and protect their brand.
Environmental liability transfer is a key component of these transactions. The buyer may accept all environmental liability, or certain aspects may be carved out to stay with the seller (known, unknown, offsite, onsite, water, soil, sediment, subsurface vapors, etc.).
It is critical to qualify buyers in brownfield deals, as financing is a special concern in many cases. Brownfields are more likely to be funded by private capital than from banks because of the risk inherent in properties with an environmental history. Sellers with time sensitivity should be wary of higher offers with multiple contingencies, especially if funding must be raised or new zoning procured in order to proceed.
|In conclusion, marketing and closing brownfields can be a fulfilling niche for brokers who focus on commercial and industrial properties. Navigating the complexities involved requires the right information and the right partners to successfully close.