Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

January 13, 2025 INDUSTRY OUTLOOK | COMMERCIAL REAL ESTATE | Expert's Corner

Transfer Act and PFAS: two issues to watch in 2025 for commercial real estate industry

Contributed Gary O’Connor
By Gary O’Connor and Steven J. Stafstrom Jr.
Check out the rest of HBJ's 2025 economic forecast issue
More Information

As a small state with a long industrial history, Connecticut has relatively high concentrations of brownfields and other sites requiring environmental remediation.

Streamlining the process of cleaning up and redeveloping these sites is essential to Connecticut’s economic growth.

While the commercial and industrial real estate industry awaits the sunsetting of the Transfer Act, which many stakeholders believe has been a major impediment to the transfer and redevelopment of contaminated properties, a family of emerging chemicals — commonly referred to as PFAS — poses the biggest potential threat to the real estate market in a generation.

Transfer Act to sunset

Contributed
Steven J. Stafstrom

2025 may finally be the year Connecticut leaves the Transfer Act behind.

For decades, the Transfer Act, which was enacted to ensure the cleanup of properties when they are transferred or sold, has been a hindrance to the redevelopment of contaminated sites.

It’s incredibly easy to trigger, expensive to comply with, and relatively ineffective with only about 10% of filings initiated ever closed.

In 2020, the legislature passed Public Act 20-9 to replace the Transfer Act with a new release-based cleanup program, which would become effective once a new set of release-based cleanup regulations were adopted.

Instead of being triggered by the transfer of a property or business, the release-based cleanup regulations will come into play only when the release of a hazardous substance occurs, or a historical release is identified.

Initially, the release-based cleanup regulations were expected to be drafted and adopted within a year, but the task of completing comprehensive regulations for a new remediation program has been a challenge, and that timeline has continued to be extended.

Last fall, the General Assembly held a public comment session regarding the new proposed regulations, and the Regulation Review Committee appears to be getting closer to approving them.

While the transition to the released-based cleanup program is greatly anticipated by the real estate industry, there is certainly potential for implementation issues and unintended consequences.

The new regulations are going to be a sea change from the current transaction-based program that has been in place since the 1980s. Likewise, there are a lot of questions as to how these regulations are going to tie into the existing body of environmental statutes.

Nevertheless, it is expected that the sunsetting of the Transfer Act and transition to the released-based cleanup program will be a net positive for the real estate industry in Connecticut.

Emerging threat of PFAS

We are only beginning to understand the impacts of Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) on the real estate industry. These “forever chemicals,” used in everything from consumer products to fire suppressants, migrate easily and can take more than 1,000 years to break down.

While PFAS chemicals were first manufactured in the 1940s, only recently have they caught the attention of the public, as a result of the settlement of class action lawsuits and implementation of a number of federal regulations.

A class action lawsuit against Dupont, Chemour and Cortevat resulted in a February settlement that requires the chemical manufacturers to pay $1.1 billion to settle claims that they were negligent in the production, handling and disposal of PFAS, and withheld information about their harmful effects.

In 2024, the Environmental Protection Agency stepped up its push to regulate PFAS:

• On Jan. 31, the EPA issued regulations under the Resource Conservation and Recovery Act (RCRA), that would designate nine PFAS chemicals as hazardous constituents.

• On April 10, EPA released its final National Primary Drinking Water Regulation under the Safe Drinking Water Act, which set drinking water standards for several PFAS compounds.

• On May 8, the EPA designated PFOS and PFOA (two common PFAS compounds) as hazardous substances.

These regulations will have a significant impact on the value of properties contaminated by PFAS, as well as the cost and time of due diligence related to the purchase of commercial and industrial properties.

For instance, a phase one environmental site assessment — a standard due-diligence requirement for prospective purchasers — will now have to address potential contamination of PFAS substances.

Given the widespread migration of PFAS, many properties will be identified with some level of the chemicals, which will necessitate a more extensive phase two environmental site assessment, adding cost and time to the transaction.

Given the uncertainty as to the toxicity levels of the various PFAS chemicals and the increasing regulation of PFAS by federal and state environmental agencies at extraordinary low levels (parts per trillion), prospective purchasers may walk away from properties where the chemical substances are detected — at least until there is more certainty as to the levels of PFAS that will trigger remediation of a property, and the ultimate cost of remediation.

Unfortunately, there will be no quick solution to the PFAS problem. The sheer number of these PFAS substances — estimated to exceed 10,000 — poses a daunting challenge for regulatory agencies.

Establishing comprehensive cleanup standards and remediation guidelines is further complicated by the lack of robust toxicological data and scientific consensus on safe exposure levels.

Real estate professionals can only hope that regulators do not take a very cautious approach and set low action levels and costly remediation requirements until there is a more comprehensive understanding of PFAS substances.

Gary O’Connor and Steven J. Stafstrom Jr. are partners at the Connecticut law firm Pullman & Comley.

Sign up for Enews

Most Recent

Most Recent

0 Comments

Order a PDF