Vapor Intrusion Due Diligence and the Landlord/Tenant Relationship
By: Scott Hitch
The potential for soil and groundwater contamination to migrate through soil gas ("vapor intrusion") into interior building spaces is increasingly becoming a critical component of environmental due diligence in real estate transactions, remediation of brownfield sites, and in development of infill areas.
The term “vapor intrusion” refers to contaminated soil or groundwater chemicals that evaporate through the air into a building above. Volatile organic compounds from soil and groundwater releases may vaporize or volatilize, becoming a gas that can find its way into buildings through cracks in the foundation, through openings where plumbing or utilities come into the building, along utility corridors or from sumps designed to keep groundwater from ponding in basements.
Common sources of vapor-forming chemicals include gas stations, dry cleaners and industrial facilities that use chlorinated solvents. In some cases, vapor intrusion may contribute to illness, odors or, rarely, explosion. If vapor intrusion results in high concentrations of hazardous chemicals in indoor air, building occupants breathing in the chemicals may experience headaches, short-term memory lapses, or other symptoms. There is a growing body of scientific research regarding the health risk of long-term exposure to hazardous chemicals in indoor air.
Historically, environmental due diligence focused almost exclusively on impacts to soil and groundwater. Where a property has known or suspected prior environmental releases, environmental engineers perform "phase II" soil and groundwater sampling and laboratory testing to determine whether that contamination required remediation under state and federal hazardous material remediation laws.
Now, careful consideration of the potential for prior environmental releases to enter building spaces must be added to the "all appropriate inquiries" to be taken during due diligence to meet accepted standards of environmental due diligence for real estate transactions. Understanding and mitigating for potential vapor intrusion may ward off exposure claims from tenants, and can help protect property values from environmental stigma price reductions.
The protocol for conducting Phase I environmental site assessments, ASTM E1527-13, specifically requires assessing the potential for hazardous vapors to migrate onto or within the target property. It does so by defining “migrate/migration” as “the movement of hazardous substances or petroleum products in any form, including, for example, solid and liquid at the surface or subsurface, and vapor in the subsurface,” and then requiring an analysis of surrounding property uses and data-base records for migration potential. But the phase I protocol typically only results in a consultant recommending additional analysis of the vapor pathway if there are other indications of soil and groundwater releases in areas that could impact onsite building structures.
Last June, the U.S. EPA Office of Solid Waste and Emergency Response (OSWER) released long-awaited guidance regarding the investigation and mitigation of vapor intrusion from subsurface soil and groundwater contamination through soil gas into building structures. Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Vapor Sources to Indoor Air, available at http://www.epa.gov/oswer/vaporintrusion/documents/OSWER-Vapor-Intrusion-Technical-Guide-Final.pdf. EPA issued the guidance in an effort to bring consistency to assessment of vapor intrusion concerns and for preventing human exposure to vapor at contaminated sites.
Since the inclusion of vapor migration potential in the ASTM Phase I standard and EPA's vapor intrusion assessment guidance last summer, environmental practitioners have wrestled with legal and technical ramifications. As methods for measuring and assessing the migration of hazardous vapors from contaminated subsurface sources has become more sophisticated and awareness of the potential of exposure to vapor intrusion has increased, approaches for evaluating and managing vapor intrusion increasingly are of central concern.
The Georgia Brownfield Act illustrates a central issue regarding vapor: how does a property owner/landlord insulate itself from liability to its tenants for exposure to vapor from contamination?
The Brownfield Act provides that, upon the Georgia Environmental Protection Division's approval of a corrective action plan or concurrence with the certification of compliance, a prospective purchaser "shall not be liable to the state or any third
party for costs incurred in the remediation of, equitable relief relating to, or damages
resultant from the preexisting release." O.C.G.A. §12-8-207(a)(1). No court has opined on whether this limitation of liability covers liability under other statutes (for example, federal CERCLA liability may remain a concern), nor has a court interpreted this provision as it relates to claims by tenants regarding exposure to hazardous vapor in the building space.
"Release" is defined under the Brownfield Act to include "any intentional or unintentional act or omission resulting in the spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment, … of any hazardous waste, hazardous constituent, or hazardous substance; provided, however, that such term shall not include any release which results in exposure to persons solely within a workplace, with respect to a claim which such persons may assert against the employer of such persons; emissions from the engine exhaust of any motor vehicle, rolling stock, aircraft, vessel, or pipeline pumping station; or the normal application of fertilizer.." O.C.G.A. § 12-9-92(11)(emphasis added). Based on the statute's language regarding indoor releases, an argument could be made that the Brownfield Act does not directly provide the opportunity to limit liability for indoor air quality claims, at least in the context of workplace exposure claims.
Moreover, the Georgia Brownfield Act provides an important exception to the availability of a limitation of liability: "[t]he limitation of liability provided by this article shall not affect any right of indemnification which any person has or may acquire by contract against any other person who is otherwise liable for creating an environmental hazard." O.C.G.A. § 12-8-208(b)(emphasis added). While this provision has not been tested in court, arguably a tenant could claim that a landlord's maintenance duties under a commercial (or, especially, a residential) lease trump any limitation of liability afforded by the Brownfield Act in relation to vapor intrusion in the indoor work- or living space.
In the absence of specific court guidance, it remains important to reduce risks associated with environmental issues.
We can assist with managing vapor intrusion risks in real estate transactions by:
- Working with environmental consultants to assess and design vapor mitigation systems;
- Enrolling previously impacted properties into state brownfield programs to obtain regulatory limitation of liability status;
- Crafting lease language to clarify landlord and tenant obligations regarding exposure to vapor, maintenance of vapor mitigation systems, and related issues.
Wendy Wilkie Parker
The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice based on particular situations.