The most significant of Freddie Mac’s environmental report updates is a requirement to indicate in the Phase I ESA whether the state in which the property is located has a State Super Lien Law.  Super Liens would allow environmental authorities to place a first priority lien on the Property as a result of environmental hazards.  Numerous states currently have Super Lien laws in effect, including Connecticut, Hawaii, Louisiana, Maine, Massachusetts, Michigan, New Hampshire, New Jersey, and Wisconsin.

Another Freddie Mac ESA revision is a clarification that the opinion that a Property contains no asbestos-containing materials (ACM) cannot be based on the Property’s construction date.  Freddie Mac requires that the consultant either render a professional opinion on whether the building contains asbestos, that opinion not being based solely on the age of the building, or conduct sampling of suspect ACM. In lieu of conducting sampling, an O&M Plan may be recommended if the material is:

• Undamaged non-friable; and
• Non-hazardous in its current form, condition and location.

An abbreviated O&M plan is allowed for undamaged, encapsulated friable joint compound, if that is the only suspect material.  If sampling is conducted, a qualified professional must analyze the samples utilizing polarized light microscopy and dispersion staining.

Other revisions include:

• The minimum number of units to be inspected and/or sampled
• Requires that Freddie Mac approves O&M plans prior to the loan origination date
• Clarifying the inspection requirements for PCBs
• Revisions to form 1103

Visit our Freddie Mac due diligence webpage for a full rundown of the revisions.

LSRPs are required to meet the same stringent cleanup standards as previously established and are bound by a strict code of ethics; however, the process of remediation will proceed much more quickly under this new program.  This is a welcome change for industrial and commercial property owners and developers that are eager to achieve site closure and return properties to greatest productive use.

Given the relative newness of this program, there seems to be a shortage of LSRPs in New Jersey.  The NJDEP anticipated  receiving 5,000 applications upon the inception of the program.  To date, less than 500 certifications have been processed.  Partner Engineering and Science’s David Umbach is a PG and an LSRP and has been overseeing remediation sites since 1981, including more than 1,000 major oil company UST site removals, Industrial site closures, Brownfields redevelopments, HUD, FHA and SBA funded developments, Industrial waste system closure and construction, Landfill capping and closure,  Lagoon, pond and marina dredging, Wetlands reconstruction, Municipal water supply system designs, Spill Prevention Containment and Countermeasure Plan preparation, ISRA and RCRA compliance, groundwater remediation system design and operation.

Last week the NJDEP issued new guidance on complying with the program, clarifying certain fees, forms and site classifications/scopes of work.  Visit Partner for information on the LSRP program and the recent advisory.

The Phase 1 Environmental Site Assessment can easily address erosion control issues at the same time.   To do this, the client should work with a firm that has expertise in both erosion control and environmental site assessment.

Erosion control measures include: silt fences, straw bales or sandbags around the perimeter, engineered catch basins, and seeding of exposed soils.   

Partner Engineering and Sciences, offers a full range of erosion control products ranging from site inspection to design of mitigation measures.

Phase IIs are commonly recommended for historical use of a site by environmentally sensitive uses such as: a gas station, a dry cleaners, industrial uses, and auto repair.   The Phase II will test the soil in areas of concern as determined during the Phase I ESA and the samples collected from these borings will be sampled for the chemicals of concern.    A good Phase I ESA is critical in adequately scoping a Phase II Environmental Report.  

The Phase II Environmental Report will evaluate if the historical use of hazardous chemicals on the subject site are a threat to human health, groundwater, or the general environment. 

When reviewing an environmental report, important questions to ask are:  1) did the scope of work materially meet the requirements of ASTM 1527-2007 and those of the EPA’s All Appropriate Inquiry (AAI) Standard; 2) does the report contain enough information and data to support the decision at hand; and 3) did the author interpret the environmental risks in a way that fits into your client’s paradigm.  

The bottom line is that while we should take firm positions on the facts and risk interpretation, we should always give the other professional the benefit of the doubt.  

The consultant must complete HUD’s environmental form HUD-4128 “Environmental Assessment and Compliance Finding for the Related Laws.”  HUD Form 4128 requires the consultant to address issue beyond the traditional ASTM Phase I ESA.   For example, the consultant must opine on the site’s exposure to noise and must address asbestos and lead based paint.

Recently, HUD has began requiring a Tier 1 vapor intrusion (VI) screen as defined by  ASTM E 2600 with the Phase I environmental site assessments. Per Tier I guidelines, the environmental professional must perform an initial vapor intrusion screen to determine if there is a potential for toxic vapors to exist onsite as a result of an onsite or offsite release.

HUD also wants to ensure that the environmental professionals working on their projects are experienced with HUD projects.   The engineers and architects that run my firm’s HUD Group are MAP Certified and LEAN Certified, and these are important qualifications in the universe of HUD due diligence. 

All MAP projects (purchase, refinance, new construction or substantial rehabilitation) require a Phase I Environmental Site Assessment (ESA), in accordance with the American Society of Testing Materials (ASTM) Standards E1527-97 as amended.  Completion of an environmental form (HUD-4128) established by HUD, is also required as part of the environmental assessment.  Partner Engineering and Science (Partner), understands the need for a strong screening process and has extensive experience in performing HUD Phase I ESAs for various clients including cities, lenders, private equity clients, developers and brokers.  In addition to understanding the NEPA process, Partner understands the importance of informing our clients of potential issues that could delay or even break a deal.  As the leader in Due Diligence, Partner consistently provides HUD staff with comprehensive reports that meet all compliance findings described in HUD -4218.  This creates a smoother screening process and allows the lender to focus on other deals.  

Given the current state of the economy and the Obama administration’s commitment to revitalize government backed loans, HUD Phase Is may become a more accessible option.

Phytoremediation is considered a clean, cost-effective and non-environmentally disruptive technology, as opposed to mechanical cleanup methods such as soil excavation or pumping polluted groundwater.  Over the past 20 years, this technology has become increasingly popular and has been employed at sites with soils contaminated with lead, uranium, and arsenic.  However, one major disadvantage of phytoremediation is that it requires a long-term commitment as the process is dependent on plant growth, tolerance to toxicity and bioaccumulation capacity.

My company, Partner Engineering and Science (Partner), employs various remediation technologies to mitigate contaminated sites.   In addition to applying traditional remediation methods, Partner is committed to applying the most efficient and economical methods, including phytoremediation.   With the limitations associated with phytoremediation, this technology has not been widely applied.  However, the recent introduction of modified transgenic plants may drive phytoremediation to become the preferred technology in the near future.

For starters, most clients want the Phase I Environmental Audit to be 100% compliant with the EPA’s All Appropriate Inquiry (AAI) rule.  Often when doing a Phase I Environmental Audit in support of a new loan, my company, Partner Engineering and Science, will often rely on a preliminary title report or cut the environmental lien search from the scope of the Phase I Environmental Audit.   This saves the client $250 and cuts a piece of the scope that very rarely uncovers something significant.  Nevertheless, when a lender is taking title to property they usually want the Phase I ESA with no limitations.

Setting up the site visits can be a real challenge during a foreclosure.  I highly recommend using a firm with a local environmental site inspector, as the site contact may shine the inspector.  If the inspector had to fly to the site, then the consulting firm may try to pass extra costs on to their clients.  For example, if you need to hire a Phase I Environmetnal Site Assessment in Texas, clearly you are wise to hire a firm with a significant presence in Texas.  My firm, Partner published the locations of our offices and inspectors on our coverage map. 

Lenders often want to know the physical condition of the asset before for closing and order a Property Condition Assessment Report.   The Property Condition Assessment Report is also a valuable tool to the lender when selling the property.