New law for landlords regarding indoor air quality disclosure

On September 4, 2008 Governor Paterson signed a bill which will become effective in 90 days that requires landlords to disclose to tenants evidence of adverse indoor air quality. The law applies to owners of either residential or commercial real property. Up until now there were only requirements to inform property owners and landlords of certain environmental hazards, but not tenants. No system or law was in place to protect renters unknowingly exposed to potential carcinogens possibly present in their dwellings as a result of the volatilization of subsurface contamination or other sources of indoor air contamination.
The new law amends New York State (NYS) Environ-mental Conservation Law (ECL) Article 27-Collection, Treatment and Disposal of Refuse and Other Solid Waste, by introducing a new Section 27-2405 Tenant Notification of Indoor Air Contamination. It applies to all landlords who receive indoor air test results exceeding NYS Department of Health (DOH) or federal Occupational Health and Safety Administration (OSHA) guidelines for indoor air quality (IAQ).1

Circumstances Leading to Enactment of the New IAQ Disclosure Law
The law was co-authored by Assemblywoman Donna Lupardo (D-Endwell) and Senator Thomas Libous (R-Binghamton) (A.108952-B/S.8634). Their dogged efforts to pass this law were perhaps motivated by constituents who were potentially unknowingly endangered by vapor intrusion into their rented apartments from subsurface soil and groundwater contamination from two well known upstate Superfund hazardous waste sites – IBM in Endicott, New York (by Binghamton) and Ithaca Gun in Ithaca, New York. The Bill was previously vetoed in 2006 under Governor Pataki and in 2007 under Governor Spitzer, allegedly because New York City landlords were concerned about the potential to contact more than 40,000 tenants.

Vapor intrusion is the migration of volatile chemicals from the subsurface into air spaces of overlaying buildings. Indoor air contamination of dwellings and work spaces can be caused by volatile chemicals such as TCE (trichloroethylene), used ubiquitously as a commercial solvent, and PCE or Perc (perchloroethylene a/k/a tetrachloroethylene), a common dry cleaning solvent, if underground plumes of such contaminants have been identified nearby. Subsurface contamination caused by petroleum spills can also be a source effecting adverse indoor air quality.

The NYS Department of Environ-mental Conservation (DEC), which assisted in crafting the law, has in the last several years focused on indoor air contamination as an emerging issue of public concern, as these frequently found chemicals and others can not only cause toxic effects to liver, kidneys, cognitive and reproductive functions, but possibly cancer. In fact, new legislation has been introduced (A.11659/S.8724) for the DOH to lower the maximum indoor air quality level for TCE, since the current NYS standard of 5 micrograms per cubic meter (mcg/m³) is two orders of magnitude higher than the most protective risk-based concentrations developed by such states as California, Colorado, New Jersey, which standards range from .016 to .02 mcg/m³ for TCE.

Who is Affected by the new Disclosure Law
The law appears to target those owners of property and their agents who are deemed to be responsible (emphasis provided) for the contamination resulting in the adverse indoor air quality, since it applies to only those property owners or their agents (i.e., landlords) which have been issued a legal Order for cleanup of their properties pursuant to the ECL or State Public Health Law pertaining to inactive hazardous waste sites or to New York Navigation Law pertaining to petroleum contaminated sites. Municipalities also are obligated to provide disclosure to tenants if the municipality is subject to a contract entered into pursuant to a State Assistance Program under the ECL, such as an Environmental Restoration Program.

Participants in the NYS Brownfield Cleanup Program (BCP) are also obligated to notify tenants, since a “Participant” is defined in the BCP as one “… who either (i) was the owner of the site at the time of the disposal of hazardous waste or discharge of petroleum or (ii) is otherwise a person responsible according to applicable principles of statutory or common law liability ….” However, the law does not mention that “Volunteers” (parties not responsible or affiliated with parties responsible for the contamination at a property) in the BCP are obligated to notify tenants of adverse air quality.

What Form of Notice must Landlords Provide?
If property owners have indoor air contamination above DOH or OSHA guidelines as determined by test results, they or their agents (landlords) must (i) give tenants a Fact Sheet that identifies the contaminant of concern and legal detection levels for that contaminant; (ii) copy tenants with guidelines for IAQ; (iii) inform tenants of health risks associated with exposure; and (iv) provide tenants with notices of resources providing more information. Generic Fact Sheets are in the process of being developed by the DOH that will presumably supply this required information, though a source indicates that the DOH Fact Sheet was “months away” from completion. Landlords will also need to provide timely notice of any public meetings required to be held to discuss the test results and provide copies of test results and/or closure letters upon fifteen (15) days request from tenants. Tenants can also contact the local health department.

If a property owner is already subject to monitoring pursuant to an ongoing remediation program or for which an indoor air quality mitigation measure has been installed – such as a vapor barrier or a sub-slab depressurization unit – the owner or its landlord is required to provide prospective tenants with a Fact Sheet and, upon request, test results, prior to the tenant signing a binding lease or rental agreement. Furthermore, the first page of the lease or rental agreement must provide the following language in at least 12-point boldface font: “NOTIFICATION OF TEST RESULTS – THE PROPERTY HAS BEEN TESTED FOR CONTAMINATION OF INDOOR AIR: TEST RESULTS AND ADDITIONAL INFORMATION ARE AVAILABLE UPON REQUEST”.

Penalties and Potential Enforcement for Non-Compliance
Landlords could be fined up to $500 per violation for each day that they are in violation. It is not clear yet whether enforcement will be aggressively pursued by the DEC and/or the DOH, or whether enforcement will merely be responsive (or not) to tenant complaints. Unless a specific policy initiative is launched in the agencies, enforcement may take a while to gather steam, or may focus more on commercial sites and larger apartment complexes at the expense of smaller multiple dwellings or residential units. Historically, enforcement of Orders pertaining to residential cleanups has defaulted to be less of a priority for state agencies as their case load for commercial non-compliance is often already overloaded.

Important Information for Real Estate and Environmental Practitioners
Lessees of commercial property now more than ever should conduct environmental due diligence of properties before renting. They should affirmatively inquire as to whether the property is subject to an environmental enforcement action or Order by the DEC or DOH. Attorneys should require representations and warranties in the Lease regarding safe environmental conditions, including indoor air quality issues. Provisions should be negotiated in the lease providing the lessee to terminate or to abate rent and/or set forth the allocation of risk and cost of consequential damages (i.e., business interruption, loss or diminution of property value and bodily injury) based on hazardous indoor or subsurface environmental conditions later discovered during the term of the lease.

As mentioned, landlords will have to include the afore-mentioned warning provision in new leases, if they qualify as being affected by this new law. Accordingly, property owners should be cautioned against voluntarily submitting to indoor air quality testing, or endeavor to protect the findings of such testing by structuring the testing to be conducted under attorney-client privilege. In the absence of further guidance or forms provided by the DOH or DEC, property owners and/or their landlords should consult counsel to draft cogent and compliant notice forms to tenants.

The purchase of environmental insurance by the landlord or the lessee should also be considered to provide an independent source of financial recovery for such indoor and other site-specific environmental conditions. Typically these exposures are excluded from general liability policies. At the very least, environmental insurance policies provide coverage within the limits of liability purchased for legal defense of claims. However, make sure that you also negotiate as part of the policy the ability to have able environmental counsel defend you in the event of a claim, since the technical and legal issues arising from these complicated risks are sometimes beyond the experience and reference of ordinary insurance panel counsel.

Suzanne M. Avena is Chair of the Environ-mental Law Practice at Garfunkel, Wild & Travis, P.C., as well as Chair of the Environ-mental Law Practice of the Nassau County Bar Association.

1. The test results can include the results of any tests conducted on indoor air, sub-slab air, ambient air, sub-slab groundwater samples and sub-slab soil samples.