The majority of commercial lenders place significant emphasis on the importance of closure or “No Further Action” letters obtained from regulatory authorities. Their focus is on the impact such documentation may have in reducing future liability associated with a former release on a collateral property.
Depending on the type of closure letter issued and the level of assessment previously completed, a closed release may still pose a concern to the bank. Closure letters for properties where contaminated soil and/or groundwater is left in place typically include a statement indicating that the release was closed using risk-based criteria or alternate standards and that restrictions apply.
Some of the restrictions that can be placed on properties with this type of closure are:
1) limits to the use of soil and/or groundwater at the property,
2) requirement of a deed restriction on the property, and
3) a stipulation that the property is limited to commercial or industrial use.
Closure letters for properties that are remediated to the most stringent regulatory standards do not include any restrictions or controls. In situations where remediation to the most stringent standards are unattainable or are time/cost prohibitive, regulatory agencies may evaluate the level of contamination, the exposure potential to the surrounding area and to property occupants and the use of the site to determine whether risk-based closure is acceptable.
Properties that are undergoing a change in use, such as commercial or industrial sites that are being redeveloped for residential use, previous risk-based closures for the property may require extra scrutiny. In addition, knowledge of the planned future use will aid in the evaluation of future risk. If impacted soils remain in place and earth moving/future development is planned, environmental management of soils and/or groundwater may be warranted. Vapor intrusion should be a consideration for properties that received risk-based closure with contaminants remaining or where contaminants may migrate onto the subject property from off-site releases.
If you are involved in a commercial property transaction and you were provided a No Further Action or closure letter, but are concerned that change in property use/redevelopment or vapor encroachment could impact environmental liability, seek the advice of an environmental professional. The experience and insight of such an expert will be beneficial in understanding the “perceived protection” offered by a closure letter.