RE77C13: 21E for Commercial Real Estate

I. DEFINITIONS and ACRONYMS

  1. 21E - M.G.L. c. 21E Massachusetts Oil and Hazardous Material Release Prevention Act also known as the State Superfund Law is the statute encompassing issues related to the identification and cleanup of property contaminated by releases of oil and/or hazardous material to the environment. Widely referenced as merely “21E”.
  2. BROWNFIELDS - Industrial sites with presence or potential presence of hazardous substances or pollutants. U.S. Environmental Protection Agency (EPA) defines a Brownfield site as "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."
  3. DEP - Massachusetts Department of Environmental Protection
  4. HAZARDOUS SUBSTANCE - "Any Material that poses threat to the environment or to public health. Under Superfund, the Environmental Protection Agency lists hundreds of hazardous substances that are either toxic (leads to death), corrosive (acidic), ignitable (danger from heat or smoke), or reactive (can lead to explosions)." - Language of Real Estate (Reilly)
  5. LSP or Licensed Site Professional - Licensing designation for consultants issued by Massachusetts Department of Environmental Protection (DEP).
  6. CERCLA - Federal Superfund known as the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) - 42 U.S.C. § 9601-9675, enacted by Congress on December 11, 1980.
  7. MCP - Massachusetts Contingency Plan - 310 CMR 40 - governs the clean-up process in Massachusetts.
  8. RAO - Response Action Outcome Statement - An RAO Statement states response actions were sufficient to achieve a level of no significant risk or at least ensure that all substantial hazards were eliminated.
  9. SUPERFUND - Common reference for United States environmental policy officially known as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
  10. SUPERLIEN - Statutory lien for environmental cleanup expenses senior to all existing or future liens on the same property.

II. Relevancy of topic to a Real Estate Licensee

  1. Disclosure obligations for any known contaminants under Chapter 93A that can influence a buyer’s decision to purchase, price offered and conditions for the sale
  2. Presence of hazardous waste is considered material information to a buyer and its presence is considered a material defect
  3. The presence of hazardous waste is considered a public health issue.

III. Established definition of hazardous substance

  1. Federal government has identified over 760 substances defined as hazardous and 275 substances as priority
  2. Give examples of hazardous substance

IV. Overview of Federal SuperFund Act of 1980

  1. Succinct review of CERCLA
  2. Governing federal agency: EPA
  3. Establishment of the National Priorities List and its definition
  4. Succinct review of civil and criminal charges that could be imposed
  5. On-line resources for consumer to identify such sites: www.epa.gov

V. M.G.L. c. 21E: SuperLien law

  1. The establishment of Massachusetts MGL Chapter 21E on April 1, 1983 aka The Superlien Law
  2. The statute encompassing issues related to the identification and clean-up procedures of property possibly contaminated by releases of oil and/or hazardous material to the environment.
  3. History of M.G.L. c. 21E
    1. M.G.L. c. 21E first passed by legislature in March 1983
    2. Modeled after federal law
    3. Provided for assessing and remediating hazardous sites and associated penalties. No mandate for testing.
    4. Properties that were initially excluded: housing of less than 4 units, thereby applying mostly to commercial properties
    5. Today’s impact is to all properties. Residential properties tend to be the biggest contributor of hazardous waste.
    6. Review of Chapter 251 of the Acts of 2004 relating to the Buzzards Bay accident with Bouchard Transportation

VI. Environmental Issues

  1. The Dangers of Hazardous Waste: Definition and examples of in-ground contamination
  2. Impact to the lender and title insurance companies
  3. Reportable vs. Minimum thresholds in Massachusetts. Penalties for not reporting. Suggested on-line resources to identify illegal sites. Review of governing enforcement body; Mass. Environmental Police
  4. The impact on negotiating real estate agreements for a seller and buyer and the use of a contingency clause for due diligence.
  5. Sample of broker’s letter of intent with contingency language, disclaimer and the need for legal and professional services.
  6. Impact to a cash buyer vs. borrower
  7. On-line DEP resources to identify known hazardous waste sites, town’s board of health list, fire permits for Underground Storage Tank (UST) and informal walk over
  8. Environmental Assessment in Massachusetts: Phase I and Phase II report
    1. Site Inspection
    2. Site History
    3. Subsurface Investigation
  9. Secured Creditors Environmental Insurance, CERCLA Lender Liability Rule/Asset Conservation Act, and Environmental Warranty Insurance
  10. Who pays for the 21E Report in Massachusetts?
  11. When must the 21E report be completed and the impact on sales and lease negotiations?
  12. Longevity of report
  13. Examples of clean-up mitigation measures
  14. Explanation of a No Further Action letter or Activity and Use Limitation (AUL) after a clean-up and the AUL identification in a commercial lease
  15. Real estate broker liability on making statements of “clean sites”; how to use an environmental disclaimer in a property information package and listing agreement, obtaining Errors and Omissions Insurance, recommending to buyers or tenants the need to conduct its own due diligence and not make statements of facts whether there is no presence or could be presence.
  16. Massachusetts Contingency Plan (MCP) (310 CMR 40) of 1993 Regulatory framework for the use of a Licensed Site Professional (LSP).
    1. Changes the way waste sites are cleaned in Mass by privatizing the cleanup program. Overview of the program.
    2. Defining who is a LSP and the requirements to become an LSP and the benefits using a LSP. Licensed Site Professional (LSP) - Licensing procedure for consultants developed by DEP. Consultant provides assistance to disposal site owners to assure site is cleaned up following the MCP process. The licensed site professional minimizes DEP involvement in site activities by overseeing actions conducted at the site. DEP maintains a list of licensed site professionals and audits their activities. Verify licensure, errors and omissions insurance and liability.
    3. Provides for a series of phase reports (Tier I and Tier II) culminating in a Response Action Outcome Statement (RAO) closing out the issue and provide protection of health, safety, public welfare and the environment.

VII. Brownfields Act: M.G.L. c. 206 of the Acts of 1998

1998 Massachusetts law entitled An Act Relative to Environmental Cleanup and Promoting the Redevelopment of Contaminated Property commonly known as the Brownfields Act.

  1. Established new incentives to encourage parties to clean up and redevelop contaminated property.
  2. Provides liability relief and financial incentives to attract new resources for these contaminated and under-utilized properties
  3. Original funding of $50,000,000 increased in 1990 by $30,000,000
  4. Review of Federal Legislative Credit for Superfund Cleanup, September 1996/Tax Credit update extending program through 2013
  5. Review of the American Recovery and Reinvestment Act of 2009: $600 million available for Superfund cleanup until Sept. 30, 2017.
  6. Review of Brownfields Act: Chapter 141 of the Acts of 2003 also known as Massachusetts Limited Lender’s Liability Act
  7. Review of 2010, Mass. Brownfields Tax Credit Program and extension through 2013
  8. Review of other Mass. subsidized cleanup laws: Recycling Loan Fund, Community Investment Loans, SBA 504 and BRAC (Brownfield Redevelopment Access to Capital)

SUGGESTED HANDOUTS:

  • M.G.L. c. 21E
  • 310 CMR 40.0000
  • M.G.L. c. 206 of Acts of 1998 (Brownfields Act)