Hot Environmental Topics

“As Is” Real Estate with an Oil Tank.

 

As the term implies “As Is” real estate means that you are purchasing the property in the current condition the property is in.    When purchasing As Is real estate, the seller is not expected to undertake any repairs or improvements.   To enter into a as is real estate purchase the buyer must complete their due diligence and evaluate the property for defects and repairs, the cost of which needs to be accounted for in the purchase price.  Many properties that are listed for sale as is may already have a reduced market price or at least that maybe the perception of the seller.  The price reduction on the asking price typically accounts for the condition of the real estate (structure, HVAC, roof, ect).  The problem with As Is real estate is that any price reductions rarely if ever account for environmental costs.

Typically due diligence of a property involves two primary areas, one being property condition assessment (on residential sites this is accomplished by a Home Inspection) and environmental assessment (on commercial sites this is completed by performing a Phase I Environmental Site Assessment -ESA).   For residential sites, an environmental assessment can consist of inspection and testing for past and present Underground Storage Tanks (USTs), mold inspections & testing, asbestos surveys, radon testing, and well water testing.

Of all these issues, heating oil underground storage tanks create the largest financial environmental liability.  Unlike a home inspection which can range between $400.00 and $1,000.00.  The cost to determine if a tank is leaking AND when a tank is found to be leaking to determine to what extent the oil has leaked (delineation) can cost in the thousands of dollars.  The investigation to evaluate the extent of leaking oil tanks can be compared to a doctor performing diagnostic tests such as x-rays, cat scans, blood work to diagnosis a patents ailments.  In both situations a problem exists (health or environmental), which simple cannot be determined by a simple physical evaluation but testing must be performed to define the issue.  These testing costs are typically a major hurdle to a buyer.

 

Regulations in New Jersey place the responsibility of the remediation of a leaking oil tank on the property owner.   Most buyers mistakenly believe that if they find a tank leaking on a property they are purchasing they are responsible for the cleanup.

 

Curren’s experience in successful As Is real estate transactions with heating oil Underground Storage Tanks (USTs), is that once a tank is found to be leaking, the cleanup is eventually performed by the seller or a substantial discount is given to the buyer that is in excess of the cost of remediation. This premium reduction is meant to address the management of the remediating the problem as well as the financing of paying for the problem. To actually get to this point in a real estate transaction, thousands of dollars in investigative borings and laboratory analysis is incurred so that the cost of cleanup can be developed.  Without this investigative step, the two parties cannot determine the extent of the contamination (diagnosis the problem), hence the problem with As Is real estate, it is costly to determine the future environmental cleanup expense.    Obviously, the As Is real estate sale is to the benefit of the seller as they avoid the management and cost of making repairs to a site.  Whereas a Home Inspection report can be used to obtain estimates from various construction trades (these estimates are usually provided at no cost and only require the contractor to visit the site), environmental cleanup to be scientifically accurate must be based on soil sampling that define the vertical and horizontal extent of the contamination.  This delineation provides a 3D model of the length, height and width of the area requiring remediation.     Unfortunately, environmental professions cannot simple visit a site to determine remediation cost, as the contamination is buried below ground and invisible to the naked eye.   Remediation costs can range from several thousand dollars or can be in excess of $100,000.00.   What is the difference in the expense?  Location of the discharge, the extent of the plume, duration of leak, geology, ect.  Simple put bigger areas of contamination are more costly to remediate than smaller areas.  

The real estate landscape is littered with lawsuits on property transfers where tanks were not previously disclosed.  The new owner finds the tank, discovers contamination and is now saddled with the financial responsibility of the cleanup.  Lawsuits typically name prior property owners, insurance companies and parties involved in the real estate transaction.   These suits attempt to uncover if the prior owner knew of the tank and concealed or failed to disclose the existence of the tank.  Other instances are more complex where the prior owner had also bought the property without knowledge of the tank.

At Curren Environmental, we consult on environmental issues pertaining to real estate.  If  you have a question contact our office 888-301-1050 between 8:00 am and 5:00 pm EST.

Governor Christie has signed legislation allowing for a two year extension to the statutory requirement in the Site Remediation Reform Act (SRRA) for the person responsible for conducting the remediation of certain sites to complete the remedial investigation by May 7, 2014.  In order to qualify for this extension, the person responsible for conducting the remediation must submit to the Department by March 7, 2014 a certification acknowledging that the following criteria have been met at the time of the certification:

(1) the person responsible for conducting the remediation has retained a licensed site remediation professional to conduct the remediation of the site; (2) the person responsible for conducting the remediation has met the remediation requirements included in all applicable mandatory remediation timeframes; (3) the person responsible for conducting the remediation has made technically complete submissions in compliance with all regulations for site remediation, as applicable, for the (a) initial receptor evaluation, (b) immediate environmental concern source control report, (c) light non-aqueous phase liquid interim remedial measure report, (d) preliminary assessment report, and (e) site investigation report; (4) the person responsible for conducting the remediation has established a remediation funding source if required by the Brownfield Act (see N.J.A.C. 58:10B-3); (5) if a remediation funding source is not required to be established, then the person responsible for conducting the remediation must establish a remediation trust fund for the estimated cost of the remedial investigation of the entire site; (6) the person responsible for conducting the remediation has paid to the Department all oversight costs known at the time of the certification and for which the person responsible for conducting the remediation has not filed a dispute with the Department; and (7) the person responsible for conducting the remediation has paid to the Department all annual remediation fees and remediation funding source surcharges, as applicable.

The Department strongly recommends that action be initiated promptly to establish a remediation trust fund, if needed, due to the timing to secure this financial instrument and the statutory requirement to submit the extension request by March 7, 2014.

There are also provisions for receiving an extension to the May 7, 2014 deadline if remediation is delayed due to obtaining state funding.

If you are buying a home, you will want to know for certain if there is or has been a tank buried on the property, and if it has leaked into the ground.  Many current owners often do not have knowledge if there is a tank or not, if they did not have a tank survey when they bought the house.  Often a visual inspection of the property is not sufficient to determine the presence of a tank.  It may yield clues, but a GPR survey will give you a definitive evaluation.

 The GPR is a sophisticated piece of equipment that sends a radar signal into the ground and will tell you where an underground tank is located.  A metal detector cannot always find the tank and is not as reliable as the GPR.  Additionally, the GPR can tell you where a former underground tank was located so the soil can be tested for past leaks.

Because the costs associated with removing the tank and any related cleanup are the responsibility of the current owner of the property, have the GPR scan before you purchase the home.  Otherwise, you run the risk of buying the property and moving in, only to discover at a later date you have an underground tank.  At that point, the removal is your responsibility and may end up costing you thousands of dollars.

 

Q1. Why is mold a concern?

Mold is potentially hazardous to your health.  It causes a number of health concerns, including allergic reactions and respiratory problems. Persons especially susceptible to irritations from mold include the elderly, newborns, those with asthma, or a compromised immune system.  Additionally, mold breaks down organic material such as drywall and wood that can cause structural damage to a home if left to grow and spread. 

Q2. How do I know if a house I am buying has mold?

The best way to be sure if a house has mold is to have it inspected by a professional.  Often there are signs of water damage or a musty odor.  These are indications you may have mold.  Obtain the services of an environmental mold professional, who will perform an inspection of the property using sophisticated equipment to confirm the presence of mold.

Q3. Can I find the mold and just fix the problem myself?

You may see mold, but it likely is also hiding somewhere you can’t see.  Mold is often found behind dry wall, in ceiling tiles, under carpets, inside walls, around leaky pipes, in ductwork, and in attics and crawlspaces.  Investigation of hidden mold problems is best done by an environmental professional, who has the proper equipment to detect hidden mold.  If there is mold growing in an area of your home, an untrained person is likely to disturb the site and cause mold spores to spread.  Hiring an experienced professional will protect you from this mistake.

Q4. My home inspector found mold, now what?

Once you have discovered mold, you need to locate the moisture problem and correct it promptly.  Call a professional who will carefully contain the area, remove the mold, and treat the area to prevent further mold growth. In some instances they may need to check for possible structural damage.

Q5. How do you check for mold?

There are different ways to detect the presence of mold, including a visual inspection, air sampling, surface sampling, bulk testing, moisture evaluation, and borescope.  There are many different types of mold.  Laboratory testing can identify the species of mold present in your home.

Q6. Are mold levels regulated by the law?

There are no federal laws or standards regulating types or levels of mold found in a residential setting. Mold testing and remediation follows industry guidelines to remediate and test mold.

When a home inspector finds mold, it’s time to call an environmental mold professional.  Having mold in your home risks damaging your real estate deal. It causes alarm and can deter potential buyers. 

What does finding mold mean?

If you have mold, there is an underlying moisture problem that was fixed and the mold went undetected or you still have a water problem that has to be fixed.  The moisture issue causing the mold growth must be addressed or the mold will grow back.  Trying to fix the mold problem yourself is not advisable.  Mold professionals are trained in the use of proper personal protective equipment, including respirators.  When remediating mold specialized equipment is used to create a containment area and an air filtration system is used during mold cleanup and remediation.  Attempting to remove the mold without training and appropriate equipment risks spreading the mold.  Handling mold without the proper protective gear can cause allergic reactions and adversely influence health.  Many people are under the impression they can simply kill mold using bleach, but that is not enough.  Dead mold spores can still cause allergic reactions. 

Mold needs an organic surface (food source) to grow.  Homes and buildings are filed with organic material for mold to consume. Mold can grow on the paperbacking of fiberglass insulation, sheetrock, wood, dust, cardboard, pretty much anything organic.   The problem with mold it tends to grow where we won't immediately see it, such as behind walls, basements, attics and in crawlspaces. 

 

Have an environmental professional make certain that all of your mold is removed and help you move forward with your home sale.  Paying for a mold inspection and dealing with a mold problem early on can end up saving thousands of dollars in the long run.

February 22, 2012 LSRP Deadline Update

The NJDEP has been notifying all commercial property owners that are still listed as active contaminated sites, notices of the LSRP deadline.   (Residentail property owner's with underground heating oil tanks are NOT required to enter into the LSRP program.) The NJDEP realizes that MANY of these sites may only have clerical issues that need to be resolved before they can be removed from the contaminated site list and receive an NFA (No Further Action).   The NJDEP is attempting to process as many of these sites as possible before the May 7, 2012 deadline.    Sites that are more involved, i.e., investigative work and remediation is still ongoing, have a far smaller chance of receiving an NFA before May.

 

 

January 2012 Update

Owners of commercial properties in New Jersey that are known to have some level of contamination (i.e., property has an NJDEP case number) have until May 7, 2012 to hire a NJDEP LSRP.  (Residentail property owner's with underground heating oil tanks are NOT required to enter into the LSRP program.) Hiring an LSRP is akin to hiring an accountant or attorney to handle your respective financial and legal issues.   Property owners have been receiving written notices from the NJDEP informing them that they must engage an LSRP to manage their environmental issues.  The NJDEP was allowing a grace period for properties that had existing NJDEP case numbers (New Jersey spill numbers) to avoid entering the LSRP program.  These older NJDEP cases had to have work completed and submitted to to the NJDEP by March of 2012 to allow the NJDEP time to review the reports prior to the May 2012 deadline.  

At this point and based on our discussions with various NJDEP Case Managers, there appears to be a slim chance to close out existing NJDEP cases under  the review of the NJDEP.  The stacks of case files pending review at this time appear to be more than the NJDEP can provide responses to by the May 7, 2012 deadline.  Therefore, the NJDEP is currently recommending that future submissions be performed under the direction of an LSRP.  Existing cases must Opt-In to the Site Remediation Reform Act (“SRRA”) Program and retain an LSRP.  All new cases and those cases which initiated remediation or remedial actions after November 3, 2009 need to hire an LSRP immediately. 

Therefore, at this time, it appears that almost all future NJDEP submissions, except where the remediating party has not performed timely actions and where the concern poses a significant threat to human health and the environment, must involve an LSRP.

One of the most significant first submissions for existing cases and cased which initiated remediation prior to November 4, 2009, if it has not been completed at this time is the Receptor Evaluation (“RE”).  The Initial RE should have been submitted to the NJDEP by March 1, 2011 or one (1) year after the initiation of remediating a site after March 1, 2010. 

The Mandatory Timeframe for submission of the Initial RE is March 1, 2012 or two (2) years after the initiation of remediation that occurs after March 1, 2010.

 

Changes to the NJDEP & EDA Tank Grant Effective September 15, 2011

Grant applications that have already passed NJDEP review and have been submitted to the EDA are now being processed by the EDA with the monies added to the Grant Fund from the 2012 State appropriation.   These applicants who had submitted their grants prior to the May 3, 2011 fund change  will be receiving notification from the EDA over the next few weeks.

Applications that are in-house at the EDA but incomplete will be reviewed and processed in the order that they were received and held until sufficient funds become available.

There is a priority system that is in place pertaining to which applicants get funding first as per NJSA 58:10A-37.4, which is as follows:  

1) Applications indicating a discharge posing a threat to drinking water, human health or sensitive ecological area;

2) Supplemental applications for remediation of discharge from regulated tanks;

3) Applications for remediation of discharge from regulated tanks;

4) Supplemental applications for remediation of discharge from unregulated tanks;

5) Applications for remediation of discharge from unregulated tanks;

6) Non-leaking tank applications

Within each of these categories, priority is based on the application filing date and processing dates that EDA staff adheres to when conducting its review.

As of May 2011, New Jersey's leaking tank grant and non leaking tank grant are not processing new applications.   What this means for anyone who has yet to submit a grant application is that your chances of receiving funding are less than if you had submitted before May 2011.  The sheer popularity of the grant program inundated the NJDEP with applications and depleted the EDA of funds.   Couple this with a lack of cash infusions by New Jersey (funds come from the corporate tax) and it is easy to see why the well is running dry.  No one can argue that the tank grant program has not helped homeowners remove and remediate tank leaks.   The fundamental idea behind the grant was to encourage homeowners to remove buried steel tank, before they leak and to assist homeowners with remediating tanks that did leak.  There is no question that a buried steel oil tank will leak at some point, be it next week, next year or 20 years from now, rust never sleeps.  So all the tanks that were removed that did not leak saved thousand of dollars in future remediation costs.  

If you were planning to remove your tank due to a leaking concern, it is still a good idea to remove the tank because it is a replaceable item just like a roof or a hot water heater.   But since it is a replaceable item, the oil tank program no longer provides monies for removing non leaking grants.

If your tank leaked, your next step is to delineate the extent of the contamination so a cost can be developed to remediate the oil contamination.  These costs can then be applied to a leaking tank grant, which New Jersey is still accepting (applications are date stamped and will be processed when monies are available).   If you find that the cost to address the tank leak is within your budget, you can hire a certified (UHOT) company to do the work and submit to the grant (when monies are available) for reimbursement.

Who requires a Phase I ESA?

Traditionally, a Phase I was contracted by the bank or lending institution on properties where financing was being arranged.  The Phase I was primarily  performed for the protection of the banks, who were concerned that if they loaned money for a contaminated property they may be held liable for the site cleanup.  Today, many banks with loans under a million dollars and borrowers supplying a down payment do not require a Phase I.  This has been an industry shift over the past several years as banks have come to understand where their limit of liability stands.

Cost for a Phase I ESA

 

 

What is included in a Phase I?

The Phase I is a property assessment that includes a walkover of the property and associated structures; a review of historic property information including maps, aerial photographs, deeds, telephone or address directories, etc.; a review of contaminated properties in the vicinity of the subject property; a summary of knowledgeable party information and review of prior reports; and the review of local, State and Federal files pertaining to the property address.

Items evaluated in the Phase I report include: tanks, drains, pits, spills, in-ground and aboveground equipment, petroleum and chemical use, and environmental liens.

Additional issues which may be included in the Phase I at the lenders or clients request include: wetlands, radon, asbestos, lead-based paint, and drinking water. 

The Phase I report is typically research only.  Unless otherwise specified as part of the scope of work, testing or surveys are outside of the typical Phase I requirements.

Why complete a Phase I if my bank does not require one?

Although many banks are not requiring a Phase I on some commercial loans, the environmental regulations leave the burden of environmental responsibility on the property owner.  Performing a Phase I, allows a purchaser to complete the necessary due diligence.  It is this due diligence that enables a purchaser to obtain prior to taking possession of a property.  Buyer beware is relevant now more than ever in commercial real estate transactions.  If a property is purchased without a due diligence evaluation and subsequent environmental issues are found in association with the property, the property owner is now burdened with the cost of remediating the issue. The performance of a pre-purchase Phase I could alleviate the potential for finding environmental issues in the future and thereby holding up future transactions.  As a potential purchaser, the determination of environmental issues on a property could be used as leverage for the seller to remediate the concern prior to purchase or could be used to negotiate the property value pending the need for the potential purchaser to perform the cleanup.

If I don’t do a Phase I and buy a property how would I ever find out if there was an environmental problem with the site?

The most common way is when you go to sell and the potential buyer completes a Phase I and discovers an environmental Area of Concern (AOC).   Today the largest purchaser of Phase I’s is not the banks, but commercial real estate investors and owners (*transactions under $1,000,000.00).

I own a property, never had a Phase I and I am now thinking of selling the property.  Do property owners have Phase I’s performed?

One of the largest shifts in the commercial real estate market today is that many land owners are having a Phase I performed to root out environmental issues before they become an issue when a buyer is found.   A buyer performed Phase I is viewed as both a marketing tool and an environmental property assessment that can help sellers anticipate issues with a property.  It can be akin to a homeowner having a home inspection completed to address issues that a purchaser might find during their inspection. 

If an environmental issue is found in a Phase I report on a property I am buying, can I still purchase the property?

 If the issue is fully disclosed to the lender (if one is involved) and the buyer is wiling to accept the liability and cost of addressing the issue, then yes you can buy the property.  But the real question is should I address the issue before buying the property?

The investigation of potential issues found in the Phase I is typically addressed as part of a Phase II Environmental Site Assessment.

The purpose of this document is to provide a concise reference to the preferred practices and procedures for oil tank removals in NJ. 

 

Buried oil tanks raise a variety of environmental, safety, legal and economic concerns for home owners and home buyers. The largest concern relates to the environmental issues that are caused when the oil tank leaks and causes  soil or groundwater  contamination. 

The following is a breakdown of the proper steps that should taken in order to remove your residential oil tank. 

Step 1: Permitting 

Local construction/demolition and/or fire subcode permits need to be applied for and the permits approved by the municipal office.     Once the local permits are approved, it is typical that the local inspector will need to be onsite for all or a part of the removal activities.  Permit application, insuring permit approval and scheduling of local inspectors is always done by Curren Environmental before removing the oil tank. 

Step 2: Underground Utilities 

State law requires that before any excavation activities can commence, a utility markout will need to be performed. The company performing the oil tank removal should call for an underground markout through “NJ One Call”.  t is the law in New Jersey and other states, to call for a utility markout before you dig. Make sure the company you choose to remove the tank obtains a markout confirmation number.  It protects all parties involved. 

Step 3: Oil Tank Cleaning 

Cleaning of the tank will consist of wiping, squeegeeing and removing all liquids and sludges from the tank.  Liquids are then either  placed into onsite storage containers or a vacuum truck. . 

Step 4: Oil Tank Removal    

It is recommended that all oil tanks be removed from the ground  when taking a tank out of service.  (In some instances when removal of the oil tank may damage the integrity of the structure an abandonment in place can be performed.)  By removing the tank from the ground a site assessment can be performed to determine if the tank has maintained integrity. 

Step 5: Oil Tank Site Assessment 

After the oil tank is removed a site assessment can performed by Curren’s certified NJDEP Subsurface Evaluator.  The site assessment to evaluate whether contamination is present in the excavation can be carried out in a variety of ways  while the tank is being removed. 

▸   Evidence of contamination can be determined from product odors, product stained soils, and/or visual evidence of free product.   

▸   Inspection of the Underground Storage Tank, (UST), for evidence of corrosion or perforations. 

▸   By a series of observations and measurements during the tank excavation and decommissioning operations such as  soil and ground water sampling and analysis. 

In New Jersey the standard analytical testing method for #-2 heating oil is Extractable Petroleum Hydrocarbons (EPH). All samples must be submitted to an independent NJDEP licensed laboratory for analysis.  EPH results are measured in part per million or ppm. Samples results above 5,100 ppm are actionable and require remedial activities to be completed.   EPH results  between 1,000 ppm and 5,100 ppm require an additional analysis. 

Step 6: Backfilling 

Once the tank is removed from the ground the void space must be backfilled with clean certified  fill.  The general equation for backfilling is five cubic yards of backfill material for every 1000 gallons of storage capacity.  For example a 500-gallon tank would require 2.5 cubic yards of fill material.  Suppling and installing the backfill is always performed by the firm removing the tank and should be included in tank removal cost. 

Step 7: Site Investigation Report - Tank Certification

Curren Environmental will prepare a Site Investigation Report which will document the tank removal activities.  The report will detail the heating oil tank removal and provide certification of the tank removal.   The report will include the following information: 

   1.  Copy of the local permit for tank removal 
   2.  Liquid receipt from the tank cleaning. 
   3.  A thorough written description of the tank removal activities. 
   4.  Photo documentation of tank removal (if available). 
   5.  A copy of the tank scrap receipt. 
   6.  Any applicable laboratory test results. 
   7.  A detailed text description of the condition of the tank and if any petroleum contamination was noted in the tank excavation. 

Curren Environmental, Inc. is a licensed by the  New Jersey Department of Environmental Protection (NJDEP) to perform closure activities associated with Underground Storage Tanks, (USTs).