environmental issues in real estate transactions · pdf fileenvironmental issues in real...

ENVIRONMENTAL ISSUES IN REAL ESTATE TRANSACTIONS

December 2014

CBRE & PINCHIN | 2014 LENDERS CONFERENCE

A legal document filed on the MOE’s Environmental Site Registry by a “qualified professional” (QP) confirming a site meets applicable MOE SCS

Upon filing an RSC, the regulatory regime grants statutory immunity from most MOE orders (clean-up, etc.)

Phase One ESA as a minimum to file an RSC (in most cases a Phase Two ESA is required)

If site doesn’t meet standards, remediation and/or risk assessment (RA) are required prior to RSC submission

And When Do I Need One?WHAT IS A RECORD OF SITE CONDITION (RSC)


Canadian Standards Association (CSA)-Standard Z768-01 (R2012) Standard “due diligence” Phase I ESA (purchase,

sale, financing, etc.) Consultants can provide “opinions” regarding

potential risk

CSA vs. O. Reg. 153/04 (amended) (RSC)PHASE I ENVIRONMENTAL SITE ASSESSMENTS


Ontario Regulation 153/04 (amended) - Phase One ESA- for RSC Purposes Related to change in land use from less sensitive to more

sensitive (i.e., commercial/industrial to residential). Many municipalities require RSC for Site Plan Approval or

Land transfer, even when no change in land use is planned.

Very prescriptive / extensive scope – results in much higher costs and time than CSA Phase I ESA.

Any 1 of 59 current or historical Potentially Contaminating Activities (PCA) on-site triggers Phase Two ESA

Very little QP “opinion” allowed

CSA vs. O. Reg. 153/04 (amended) (RSC)PHASE I ENVIRONMENTAL SITE ASSESSMENTS


Purpose is to identify “actual or potential site contamination” Assist in reducing uncertainty about potential

environmental liabilities. Assist in making informed decisions about property

transactions. Identify certain baseline environmental conditions. May be a basis for further investigations (Phase II ESA) on

a property A qualitative assessment of the property only

PurposePHASE I ESAs


Review of both historical and current Site use and adjacent land uses

Regulatory review for Site and adjacent properties Determine if there is the potential for on-Site impacts Major risk factors include: Underground Storage Tanks (“USTs”) Chemical and waste handling practices Dry Cleaning businesses Industrial land uses and manufacturing Other potential factors: Asbestos Containing Materials

(“ACMs”), Mould, etc.

Scope of WorkPHASE I ESAs


Any property with underground storage tanks (USTs)

Gas stations, bulk plants, private fuel outlets

Drycleaners (on-site cleaning) Large-scale printing operations Scrapyards / junkyards Dumps / landfills Automotive or vehicle repair

(especially older facilities)

HIGH RISK COMMERCIAL ACTIVITIES


IF YOU SEE THIS??

Fill & Vent PipesAccess Ports

Copper piping and filters

Fuel gauge inside a boiler room

Copper piping in floor –painted over


THEN YOU LIKELY HAVE THIS!!!


SMALL PERFORATIONS IN THE TANK OR PIPING CAN RESULT IN……


SUBSURFACE IMPACTS (HYDROCARBONS)


USTs (gasoline, diesel, waste oil, fuel oil)

Distribution piping/pump islands Oil/water separators In-ground hoists Solvent use and waste disposal

(poor waste management practices)

‘Soak away pits’

SERVICE STATION ISSUES


Long term or catastrophic leaks / spills can result in significant soil and groundwater impacts

Poor handling / storage practices may result in “hidden” impacts

POORLY MANAGED ASTS


Drycleaning solvent: Perchloroethylene (PCE - “PERC” ) De-greasing solvent: Trichloroethylene (TCE) PERC is used in >80% of dry cleaning equipment and

TCE is still used as an industrial degreaser Less than 1 teaspoon of PCE / TCE in an Olympic- sized

swimming pool = exceedance of drinking water criteria. Extremely difficult, time consuming and expensive to

remediate due to density and solubility

CHLORINATED SOLVENT CONTAMINATION


Chemical Plants: processing/production, mixing, etc. Generating Stations Battery Manufacturing / Recycling Asphalt Manufacturing (paving, roofing materials) Electroplating Metal Fabrication / Machining Leather Tanneries Circuit Board Manufacturing Steel Works (blast furnaces, rolling mills, foundries) Ship & Boat Building / Repair Yards Textile Mills

HIGH RISK INDUSTRIAL ACTIVITIES


CHEMICAL STORAGE & WASTE MANAGEMENT


When is an issue an issue? Client sensitivity – purpose of work (due diligence,

refinance, purchase / sale) Process to eliminate off-Site concerns Site sensitivity Distance Groundwater depth and flow direction Soil type Presence of utilities, etc. Who is the off-Site party

OFF-SITE CONTAMINANT RISKS


Multinational Corporation, or…

“Ma and Pa”


Regulation for the assessment, remediation and redevelopment of land in Ontario

New amendments came into force July 1, 2011.

Generic site condition standards (SCS) based on intended land use (residential, commercial, etc.), groundwater use (potable Table 2 vs. non-potable Table 3) and soil texture

ONTARIO REGULATION 153/04 (AMENDED)


SOME EXAMPLES(from Table 3 – non-potable, commercial/industrial, fine grained soils)Contaminant 2011

Soil (µg/g)2004

Soil (µg/g)2011

GW (µg/L)2004

GW (µg/L)

PHC (F1) 65 660 750 NVPHC (F2) 250 1500 150 NVPHC (F3) 2500 2500 500 NVPHC (F4) 6600 6600 500 NVBenzene 0.4 25 430 12000TCE 0.61 3.9 17 50PCE 21 0.45 17 5Vinyl Chloride 0.25 0.0075 1.7 1.3


PROPOSED DEVELOPMENT SCENARIO & 2011 SITE CONDITION STANDARDS(EXAMPLE)


CSA - Standard Z769-00 (R2013) – Phase II ESA Standard “due diligence” Phase II ESA (purchase, sale,

financing, etc.)Ontario Regulation 153/04 (amended) - Phase Two ESA Generally required as part of RSC filing. Mandatory soil & groundwater sampling for all Areas of

Potential Environmental Concern (APECs) Minimum / increased sampling requirements for soil &

groundwater Full vertical and horizontal delineation required More stringent reporting requirements: Hydraulic gradients, legal survey, detailed CSM,

additional figures / tables, etc.)

PHASE II (DUE DILIGENCE) VS. PHASE TWO (RSC) ESAS


Options for Management► Do nothing► Remediate to MOE Generic Standards► Risk Assessment alone► Risk Assessment & Remediation

Cost and timing are typically the governing factors Municipal Brownfield Grants and tax incentives can

greatly assist with cost Risk Assessment can assist with both cost and time

CONTAMINATED SITES


A risk based scientific process that estimates human health and environmental risks associated with chemicals / contaminants in the environment.

Used to generate risk-based, site-specific soil & groundwater standards, which are generally much less stringent than generic standards

WHAT IS A RISK ASSESSMENT (RA)


MOE- Approved Tier II & III (O.Reg. 153/04)

On-line Tier II RA model offers an alternative to meeting generic standards or completion of a traditional full scope (Tier III) RA

May require a Risk Management Plan (RMP) and Certificate of Property Use (CPU)

Use of MOE approved risk management measures (RMMs)

Cost: $35K to $80K (plus Phase One & Two ESA costs)

Approvals ~ 16 weeks (Tier II) to >2 years (Tier III)

TYPES OF RISK ASSESSMENT


Uses the same scientific / risk models as Tier II and Tier III RA, but can not be used to file an RSC (i.e., not accepted by MOE)

Short timeframe (3 to 6 weeks) Cost: $15K - $30K (depending on number and nature of

contaminants of concern) Accepted by many lenders (generally dependent on

borrower’s covenant)

Due Diligence / Screening Level Risk Assessment (SLRA)

TYPES OF RISK ASSESSMENT


Friable ACM

Sprayed fireproofing < 1974

Sprayed thermal insulation < 1974

Sprayed decorative/acoustic < 1983

Mechanical/pipe insulation < 1981

COMMON ASBESTOS CONTAINING MATERIALS


Non-Friable ACM (all still legal to apply except drywall joint compound) Vinyl floor tile < 1983 Vinyl sheet flooring < 1983 Floor adhesives – around 1992 Drywall joint compound (DJC) < 1980 Roofing materials < 1992 Asbestos – cement (transite) – Still being installed Gasketing – still being installed Ceiling tiles <1983 Plaster (variable from late 30s to early 60s)

COMMON ASBESTOS CONTAINING MATERIALS


1. Organic substrate with suitable nutrient source, e.g. Cellulose, drywall, wood, ceiling tiles, pipe wrap,

organic carpet backing, cardboard, building paper, soil in carpets, etc……

2. Moisture source active for > 48 hours Floods, leaks, wet areas / air handling units, prolonged

humidity, etc.

Conditions RequiredFACTORS FOR MOULD GROWTH IN BUILDINGS

This disclaimer shall apply to CBRE Limited, Real Estate Brokerage, and to all other divisions of the Corporation (“CBRE”). The information set out herein (the “Information”) has not been verified by CBRE, and CBREdoes not represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information orthe recipient’s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary to verify the Information prior to placing any reliance upon the Information.The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE.

Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited.

Senior Vice President │ Environmental Due Diligence & Remediation(905) 363-1368 │ [email protected] Pinchin Ltd.

Vico Paloschi, M.Sc., P. Geo. (QP)

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