Real Estate Investment Chapter 3 Environmental Constraints © 2011 Cengage Learning

Key Terms Asbestos Brownfield Carbon monoxide CERCLA Electromagnetic forces Endangered Species Act Innocent landowner defense Lead Mitigation banking

© 2011 Cengage Learning More Key Terms Phase assessment Polychlorinated biphenyls or PCBs Polychloroethylene or PCE Potentially responsible Party Power Purchase Agreements (PPAs) Wetlands protection

© 2011 Cengage Learning Introduction Special areas of land use now require permits and regulatory approval. With knowledge of potential problem areas, an investor will be better able to make informed decisions on property evaluation. Landowner will learn how to best protect the property’s value and to control future usage so as to minimize potential liability.

© 2011 Cengage Learning How the Environment Affects Humans Evidence of declinations in childhood development adjacent to environmental damage has generated grave concerns. Enough examples of chemical damage affecting a child’s brain development have surfaced to warrant much further study.

© 2011 Cengage Learning How the Environment Affects Humans Contaminated land, ignoring the liabilities for prior owners and of parties responsible for its contamination, is often not suitable for any use and is blocked off from human access completely.

© 2011 Cengage Learning Environmental Issues Examined 1. Toxic waste sites 2. Lead poisoning 3. Indoor air pollution 4. Clean water measures 5. Wetlands protection 6. Storm water runoff regulations

© 2011 Cengage Learning Environmental Issues Examined 7. Endangered species protection 8. Underground storage tanks 9. Electromagnetic forces 10. Mold 11. Carbon monoxide

© 2011 Cengage Learning Toxic Waste Sites Love Canal CERCLA Superfund Determination of Violations Release Hazardous Substance Facility Environment

© 2011 Cengage Learning Potentially Responsible Parties 1. The party who arranged for the disposal or treatment. 2. The party who transported the hazardous substance. 3. The prior owner or operator. 4. The current owner or operator.

© 2011 Cengage Learning Toxic Waste Sites Strict, Joint and Several Liability of Responsible Parties Defenses to Cost Recovery Actions Innocent Landowner Defense Phase I Assessment Phase II Assessment Phase III Assessment

© 2011 Cengage Learning Phase I Assessment Current and previous users of the site. Legal description, survey, and site map. List of current and previous owners and operators of the site. Status of title to the site.

© 2011 Cengage Learning Phase I Assessment Interviews with persons knowledgeable about the site. Zoning status of the site Aerial photographs Topographic maps

© 2011 Cengage Learning Phase I Assessment Information and documents from governmental agencies: U.S. Environmental Protection Agency (EPA) Securities and Exchange Commission (SEC) State Water and/or Health Commissions Information and documents from current owner or operator.

© 2011 Cengage Learning Phase I Assessment Storage tanks on site: Internal lining of tanks Cathodic protection Spill and overfill prevention equipment Release detection systems

© 2011 Cengage Learning Phase I Assessment Asbestos-containing materials on site Polychlorinated biphenyls (PCBs) and PCB items on site. Site inspection

© 2011 Cengage Learning Toxic Waste Sites Phase ll Assessment Phase lll Assessment EPA Policy on Homeowner Liability for Cleanup Brownfields

© 2011 Cengage Learning Lead Poisoning Sources of Lead Poisoning Inhalation Ingestion 1996 Lead-Based Paint Rules

© 2011 Cengage Learning Indoor Air Pollution Formaldehyde gas Asbestos as used in building materials Tobacco smoke Biological pollutants such as bacteria, viruses, and fungi. VOCs found in cleaning and repair work Radon gas Combustion by-products from wood, coal, or oil

© 2011 Cengage Learning Wetlands Protection Wetlands Definition Wetland Permit Requirements Wetlands Mitigation Banking Exemptions from Permit Requirements Nationwide Permits Enforcement

© 2011 Cengage Learning Endangered Species Protection The Endangered Species Act of 1973 prohibits the “taking” of endangered species as listed by the federal government. A difficult provision of the Act is that it provides a legal procedure for environmental and “no-growth” activists to challenge any new development.

© 2011 Cengage Learning Underground Storage Tanks A UST is any tank having 10% or more of its volume below ground and contains either petroleum or hazardous substances. EPA estimates that 2 million USTs are covered by the regulations and that 95% of those are used to store petroleum and its products.

© 2011 Cengage Learning Electromagnetic Forces Various studies have linked EMFs to cancer. In 1996, the National Research Council issued a report stating: “The current body of evidence does not show that exposure to these fields presents a human-health hazard.” However, can cause diminution of property values.

© 2011 Cengage Learning Mold No studies have shown that inhalation of mold spores, and possibly mycotoxins (the most toxic molds), at levels expected in mold-contaminated indoor environments are responsible for causing measurable health effects.

© 2011 Cengage Learning Mold As a result of continuing legal action, and the ability of tort lawyers to sway otherwise well-intentioned but misinformed juries, real estate practitioners and inspectors need to understand the mold issue.

© 2011 Cengage Learning Carbon Monoxide An odorless, colorless gas produced by the combustion of natural gas, oil, and propane in furnaces, water heaters, and stoves. Harmful levels of CO can result from incomplete combustion of fuel, improper installation, or blockages, leaks, or cracks.

© 2011 Cengage Learning Other Issues Financing solar power Wind energy Environmental concerns Construction Time for Wind Farms and Transmission Lines Tax Implications of Expanding Wind and Solar Energy