Suffolk County Land Bank and Brownfield Redevelopment

Environmental Law

 

On March 13, 2012, the Suffolk County Legislature unanimously approved a resolution to create the Suffolk County Land Bank Corporation (“Land Bank”), pursuant to the New York State Land Bank Program (Article 16 of the New York Not-For-Profit Corporation Law), signed into law by Governor Cuomo in July 2011. Article 16 provides New York State municipalities the ability to apply for and create land banks in their communities to take control and redevelop vacant and abandoned land, known as brownfields.

The Suffolk County Legislature has taken advantage of this opportunity by creating a land bank, which “can serve to free up strategic brownfield sites and provide for local involvement in the disposition and re-use of these sites.” Suffolk County has accumulated in excess of $20 million in back taxes from these properties over the last 20 years, but has been prohibited by the Suffolk County Tax Act from selling them for less than the amount of the taxes owed. The Land Bank will allow the county to sell the property to developers for less than what is owed in taxes, however, the developer will then be responsible for the remediation of the land. Suffolk County Legislator DuWayne Gregory (D-Amityville), in an interview with the Times Beacon Record, says that under the Land Bank, “[the county is] not responsible for cleanup. We’ll try and get the [new] property owner to clean it up.” The Land Bank hopes to tackle the approximate 83 brownfield properties in Suffolk County, totaling more than 76 acres and representing $20 million in lost tax revenue. “This land bank will finally give Suffolk a tool to put dozens of brownfields in the hands of private individuals where they can be cleaned up and restored to good use,” Suffolk County Executive Steve Bellone said in a press release.

While there is no doubt that the goals of the Land Bank are worthy of praise, both the Land Bank and prospective purchasers should be wary of potential environmental liabilities that may result from these transactions. While it is clear that the Suffolk County Land Bank has no interest in conducting the remediation of these brownfields, the mere ownership of these properties may result in unexpected environmental liabilities. If contamination is not contained and further migration of hazardous substances occurs, the Land Bank potentially can be liable for damages to adjacent properties.

Additionally, a prospective purchaser of a brownfield may face environmental liabilities as a result of its ownership of the property. Under this program, the purchaser will ultimately be responsible for the cleanup and should conduct “all appropriate inquiry” (“AAI”) into the condition of the property in order to be eligible for environmental liability protections.

The United States Environmental Protection Agency (“USEPA”) encourages local governments, land banks, and prospective purchasers to conduct all AAI so that they may become eligible for CERLCA liability protection. AAI is a critical requirement of the bona fide prospective purchaser (“BFPP”) status, which would allow a land bank and prospective purchaser to avoid CERCLA liability, as provided in CERCLA §§ 101(40) and 107(r)(1). Further requirements to maintain BFPP status include: 1. the disposal of hazardous substances had to have occurred before the party acquired the property; 2. the party cannot have an affiliation with a liable or potentially liable party; 3. the party must comply with land use restrictions and not impede effectiveness of the institutional controls; 4. the party must take reasonable steps to prevent release of hazardous substances; and 5. the party must provide full cooperation, assistance, and access to overseeing agencies.

Obtaining BFPP status is one of several ways prospective purchasers can mitigate potential environmental liabilities and minimize future costs. In addition to conducting its own environmental due diligence at the property, a prospective purchaser should negotiate protective environmental language for the brownfield sale agreement, including indemnifications, representations, and warranties. A prospective purchaser of a brownfield may also consider purchasing environmental insurance to remove risk from potential unknowns at the property that could raise the cost of cleanup. Countless times purchasers take ownership of contaminated properties only to find the costs of cleanup much greater than originally anticipated. Understanding the protections and defenses under state and federal environmental laws is critical to entering into any contract for a contaminated property. Environmental legal counsel should be retained to assist in these transactions to ensure risks are minimized and interests are protected.

For more information on Land Banks and brownfield redevelopment, please contact Miriam Villani or Jason Kaplan.

Posted by Miriam Villani