The Biden/Harris administration is quickly establishing federal environment requirements that affect commercial property owners and managers. These requirements, in addition to the COVID-19-related changes, bring new practical and legal considerations to landlords and property manager.
These five issues are the most important.
Microbial Contamination from Property Vacancy or Underutilization
Teleworking has seen an increase in popularity during the pandemic. This is due to public health measures to increase social distance and stop the spread of COVID-19. Many commercial buildings and offices have been left vacant or underutilized.
Landlords and property managers need to be aware of the increased risk of contamination from inadequate use of key building systems such as HVAC and plumbing, as workers return to work more frequently. These systems can become stagnant, making it easy for pathogenic organisms to grow.Legionella spp. at levels that could be harmful to the health and safety of customers and occupants.Legionella spp. severe form of pneumonia, which can lead to hospitalization and even death.
Most jurisdictions and localities require property managers to inspect and maintain their HVAC systems. However, very few places have similar requirements for plumbing systems. However, landlords and property managers need to consider plumbing inspections and maintenance activities before workers return to the office. Property owners who lack the necessary expertise should hire consultants to help them with these tasks.
Failure to address residual contamination could lead to adverse health outcomes, loss of income, and litigation. Property managers and property owners should consult counsel when creating communications and remediation plans. They may also want to review their pollution legal liability coverage in order to ensure that it covers contamination with microorganisms.
ASTMs Revised Phase 1 Environmental Site Assessment Standard
American Society for Testing and Materials (ASTM), has recently updated its widely used E1527 standard practice for environmental site assessments: Phase I Environmental Site Assessment Process. The new E1527-21 is the American Society for Testing and Materials. This standard has been part of EPAs all applicable inquiries (AAI), rule 40 C.F.R. Part 312, which provides a foundation for parties that may wish to be eligible for the bona fide/innocent buyer defenses to CERCLA/Superfund liabilities.
There are some notable changes in the emphasis of the revised standard. Discussions have been added to key terms that might increase reliance upon the environmental professionals subjective experience, logic rather than data when identifying recognized environmental conditions. The new and lengthy guidance included in an appendix about what constitutes a REC can be misinterpreted as binding mandates. It is not possible to determine whether hazardous substances will be found on a property. This could lead to a prove-the-negative approach to the problem rather than one that is based on concrete evidence of contamination. A revised minimum information source review requirement may allow for more detailed assessments. The revised standard allows for the inclusion of materials that are not yet considered hazardous substances under Federal law. This includes per- and polyfluoroalkyl substance (PFAS) in an optional Non-Scope section of Phase 1.
The bottom line is that Phase 1 assessments may identify more RECs under the revised ASTM standard. Phase 1 assessment consumers and users should not hesitate in raising questions about the conclusions of the reports, especially if they cannot be traced back to concrete evidence of contamination or releases.
There are still some limitations and cautions regarding Phase 1 assessments. For example, there is no legal requirement for Phase 1 assessments. Neither the ASTM standard nor EPAs AAI Rule require that RECs be corrected. Phase 2 subsurface investigations cannot be performed. Phase 1s have a limited scope. They focus on soil and groundwater contamination and do not include a complete review of environmental and related compliance risks. The innocent/bona-fide purchaser defenses are rarely invoked.
For those interested in the innocent purchaser/bona fide landowner defense, the 2013 ASTM rule (E1527-13), can still be referred to in EPAs AAI rules. Despite the fact that EPAs are directly involved in the ASTM standards revising process and that the revised standard is in-hand, it could take several months or more before the revised rule can be formally incorporated into AAI rule. The revised ASTM standard is arguably stricter than the 2013 version. It is not clear whether EPA or a court evaluating a bona fide purchaser/landowner would reject a Phase 1 under the revised standard before EPA updates their rule. In the short-term, consultants will likely offer three options to their clients: (1) Use the 2013 version until EPA update its rule; (2) Use both standards under a mixed approach or (3) Use the 2021 edition now.
EPA clarifies that the Lead Renovation, Repair, Painting Rule applies to Property Managers
These answers suggest that property managers should only obtain lead certification when their employees are renovating, repairing, or painting lead surfaces. The EPAs Lead Renovation, Repair, Painting Rule (RRP), 40 C.F.R., allows for certain exceptions. 745.80 745.92 requires that renovations, repairs, or painting of residential properties built prior to 1978 (the year that lead was banned in paint), be done only by certified firms. The EPA has kept a guideline document calledFrequent Questions from the EPA Lead-Based Paint Program(Lead FAQs) (Lead RRP Frequent Questions 7 – 28 10.doc (epa.gov).). The current version of the Lead FAQs answers two questions about property management companies (PMCs).
The EPA published a recent document.Federal Register noticeIt announced its intention to remove those Q&As from property manager Q&As. Environmental Protection Agency,Two answers to frequently asked questions about property management companies and the Toxic Substances Control Act Lead-Based Paint Renovation, Repair, and Painting Rule withdrawn, 86 Fed. Reg. 60812 (Nov. 4, 2021). The EPA wants to clarify that it:
It would assess compliance by PMCs to the RRP rules, as it would for other entities, according to the broadly applied language of the RRP Rule: No firm may perform, offer or claim to perform renovations in target housing or child-occupied facilities without certification from EPA (unless the renovation qualifies under a specific exception). 40 CFR 745.81 (a)(2)(ii). The EPA will assess compliance and appropriate enforcement actions based upon each case’s individual facts. The EPA can also exercise its enforcement discretion with respect to PMC obligations.
The Lead FAQs are guidance only and not regulation. However, comments on the proposed withdrawals were accepted by EPA through Dec. 6. The few comments received were equally split between those supporting and against the withdrawals. It is unclear how EPA will respond to comments. However, if there are not a lot of substantive comments disfavoring withdrawals, it seems likely that withdrawals will be made, especially given the Biden/Harris administrations emphasis on children’s healthcare.
PMCs will soon need to be certified as lead contractors and follow all RRP regulations. This is especially true for subcontractors who are responsible for the lead renovation work. It can be difficult to navigate the RRP at first. It is also important to establish a recordkeeping system that ensures compliance. To avoid being in the crosshairs with the EPA, it is important to regularly review compliance and compile compliance documentation.
Federal PFAS Regulatory Actions Could Create New Challenges for Property Managers and Owners
The following PFAS actions are planned by EPA for property owners and managers. There are many types of PFAS. They have different uses, toxicological profiles and chemical properties. PFOA (perfluorooctanoic acids) and PFOS(perfluorooctane sulfonic acids) have been the focus of regulatory action. However, the number of PFAS currently under federal and state scrutiny is growing.
The following PFAS actions will be taken by the EPA to address property managers and owners:
Final rulemaking to establish a federal drinking water standard for PFOA or PFOS by 2023. Some states already have drinking water standards for PFOS and PFOS in place.
TSCA action to increase data collection regarding certain PFAS. To increase reporting obligations under Toxics Release Inventory (TRI), EPA proposes rulemaking in 2022 that will categorize certain PFAS as Chemicals of Special Concern on the TRI List and remove de minimis eligibility form supplier notifications. EPA also plans to expand the TRI’s list of PFAS.
Toxicity studies for additional PFAS, such as hexafluoropropyleneoxide dimer acid or its ammonium, are commonly called GenX chemicals. Based on the toxicity assessment, EPA could decide to issue health advisories about GenX and PFBS.
Through data collection and rulemaking, we can address PFAS releases from industrial sources.
Plans to make PFOA/PFOS hazardous substances under CERCLA. According to reports, EPA’s proposal is being reviewed by the White House Office of Management and Budget before publication in the Federal Register. A site is considered contaminated under CERCLA if it is the site of a release or repercussion costs. As we have already mentioned, a site is contaminated if it is the location of a release of a hazardous substance that causes the incurrence of response costs.As explained previouslyThis hazardous substance designation could expand the scope of cleanups under CERCLA.
Parties who are purchasing new property may want to consider PFOA/PFOS during diligence activities. This depends on the site’s past use, surrounding uses, future intended use, and other factors. Parties may also want to consider PFOA, PFOS, and other PFAS when drafting provisions for environmental indemnification in purchase and sales agreements or commercial leases.
Change in incentives for heating, cooling, and power in commercial properties
The Infrastructure Investment and Jobs Act (IIJA), Pub. L. No. L. No. The companion Build Back Better Act appears to be dead as of this writing. For decades, tax and other incentives have been used to encourage energy efficiency, fuel choice, and the installation of energy systems into commercial buildings. Property managers might want to reevaluate their heating, cooling and electric power systems, as climate change mitigation is now a priority for the Biden-Harris administration.
Title V of IIJA addresses building energy efficiency. It authorizes several programs to improve building energy efficiency. They are mostly compatible with existing measures under Title V of the IIJA. However, the list of programs that Congress has funded could suggest future priorities.
IIJA authorizes grants for states to improve energy auditing. It also authorizes the creation of better model building codes in order to encourage and, in certain cases, allow for energy efficiency and resilience in buildings. It authorizes tradesmen to be trained to install these measures. It also authorizes funding for a study on obstacles to the deployment of heating systems that generate distributed power. These types of co-generation efforts are not novel, but Congress and Biden want to see more. The statute also contains provisions funding or subsidizing/encouraging various energy efficiency modifications to buildings. These programs run through many states so their exact implementation will vary.
The data may not be accurate about how important commercial buildings energy efficiency will be. The Energy Information Administration reports only data about commercial building energy use from 2003 to date. Although it has conducted a nationwide Commercial Buildings Energy Consumption Survey in 2018, only preliminary results are available. The Congress authorized information sharing between the EIA (EPA) and EPA about commercial building energy efficiency. It is unclear whether comprehensive data will drive the policies and incentives one sees moving forward. There may be opportunities to provide anecdotal data that will lead to favorable incentives to specific projects.
Federal incentives are not the only thing in town. States, tribes and municipalities are providing more incentives for energy efficiency and the installation of community-solar, where customers can purchase or lease a portion of a shared system. Customers without sufficient roof space or land for solar system installation will benefit especially from this. Commercial property managers and owners who can convert their rooftops into solar farms may also benefit. These sites can often be eligible for significant tax credits and membership fees. They also build community goodwill.
2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume II, Number 14