How Clean Is Clean?
Environmental Enlightenment #305
There’s a common misconception floating amongst parties transacting with environmentally impacted properties.
Many are familiar with the “NFA” terminology. An “NFA” letter is a formal statement from a lead regulatory agency declaring that the environmental case is closed and “No Further Action (NFA)” is required at that time. Such a statement makes most lenders comfortable in lending on the property.
HOWEVER, and not a small “however” it is: many transacting parties do not know that NFA declaration DOES NOT MEAN the property is FREE from contamination. In reality, probably most NFA-declared properties are contaminated. An NFA declaration only says that at this time, with the CURRENT USE of the land, the residual contamination does not pose imminent risk to public health and the environment.
The practical outcome of the NFA declaration is that, as long as the CURRENT USE continues, regulatory requirements for cleanup of the residual contamination are unlikely to happen. Regulatory-mandated cleanups can become very, very expensive in a hurry and reduce the value of the collateralized property to non-viable levels. The NFA declaration removes this threat.
Prospective buyers or developers must know that NFA status does not provide outright freedom to change the use of an impacted property from commercial/industrial to residential. If such is the goal, these stakeholders may need to go through some regulatory hoops in the process, and they may need to engage in extra remediation so as to fit into residential conditions.
Also, where such properties get redeveloped with subterranean spaces, there’s the possibility of running into the contaminated zone during excavation. The developers must be prepared to handle such situations. It’s not complicated.
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