ENVIRONMENT: New rules may profoundly affect real estate transactions

On Feb. 23, 1999, new “administrative rules” affecting Baseline Environmental Assessments (BEA) and Due Care obligations were filed with the Secretary of State. These rules took effect March 11 and have the potential to affect any purchase or sale of real estate impacted with environmental contamination.

As you are more than likely aware, substantial revisions to Michigan’s Environmental Clean Up Program in 1995 provided for the transferability of contaminated property to a new owner without liability to the new owner, so long as a BEA is conducted on the property.

A BEA, simply put, is an assessment of the property sufficient to distinguish previously existing contamination from new releases of contamination. Accordingly, the new owner would only be responsible for new releases of contamination and not the previously existing contamination.

Along with the changes affecting BEAs, the law also required that any owner or operator of real estate that was a source area of contamination exercise “Due Care” so that their ownership or operation of the property did not result in an unacceptable exposure of contamination to third parties. Unfortunately, there has been very little legally enforceable guidance which dictated how BEAs were to be conducted and exactly what could constitute an unacceptable exposure.

According to the new rules, those who previously conducted BEAs and determined that groundwater contamination was present will now be required to notify the DEQ within 90 days of the promulgation of the rules (June 10, 1999).

The new owner/operator may also need to develop a plan to submit to the DEQ as to how he/she intends to deal with the migrating contamination.

The DEQ has also published new guidance forms which must be utilized whenever conducting a BEA or Due Care analysis. Failure to use the department’s new designated forms can result in an imposition of liability for all existing contamination at a facility. These forms help establish minimum technical standards for the conducting of BEAs, Due Care plans and Due Care analysis.

The previous BEA requirements necessitated disclosure of the BEA to the DEQ at a future time. However, a date upon which disclosure must be made was not part of the original statutory framework.

The new rules now require disclosure of the BEA upon completion. Further, any BEAs which were conducted in the last four years and not disclosed prior to March 11, will need to be disclosed within six months of this deadline.

Although the promulgation of the new rules are not shocking, some of the new provisions will more than likely provide an unsuspecting trap for the unwary.

If you have conducted a BEA in the past in order to purchase your current property and discovered groundwater contamination, you will probably need to revisit your BEA to determine if a Due Care plan or disclosures are necessary.

For those conducting new BEAs, those BEAs will need to comply with the new regulatory framework including a fairly new and comprehensive reporting regimen.

If you’re not sure as to how you should respond to old or new BEA information, you should contact a qualified environmental consultant or experienced legal counsel to determine your compliance status.

Joseph Quandt is a partner with the Traverse City law offices of Menmuir, Zimmerman, Kuhn, Taylor and Quandt and a professor of environmental law at the Thomas M. Cooley Law School in Lansing. Prior to private practice, he was an enforcement specialist with the state DNR.

This article is intended to address information of general interest. It does not provide, nor is it intended to provide, any legal advice regarding any particular situation or subject. BIZNEWS