On September 4, 2008, Governor Paterson signed a bill that requires landlords, as of December 3, 2008, to advise tenants and occupants, under certain circumstances, of evidence of adverse indoor air quality (IAQ) in their premises.
The law applies to owners of both residential or commercial real property, and landlords could be fined as much as $500 per violation for each day that they are in violation of this requirement. Until now, no system or law was in place to protect tenants from being unknowingly exposed to potential airborne carcinogens in their premises resulting from either the volatiliz-ation of subsurface contamination or other sources of indoor air contamination.
The new law amends New York State (NYS) Environmental 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.
This provision was previously vetoed in 2006 and again in 2007 under Governors Pataki and Spitzer, respectively, allegedly because New York City landlords were fearful about potentially having to contact more than 40,000 tenants.
What Causes Indoor Air Contamination?
Indoor air contamination can be caused by hazardous vapor intrusion of volatile chemicals from contaminated subsurface soil and groundwater into the air spaces of overlaying buildings. Dwellings and work spaces can also be contaminated by underground spills of chemicals such as TCE (trichloroethylene), a widely used commercial solvent or PCE or “Perc” (perchloroethylene a/k/a tetrachloroethylene), a common dry cleaning solvent. Petroleum spills from gas stations can also be a source of adverse IAQ.
The NYS Department of Conserva-tion (DEC), which assisted in crafting the law, has focused over the last several years on indoor air contamination as an emerging issue of public concern, as fumes of these volatile chemicals can have toxic effects on the liver, kidneys, cognitive and reproductive functions and may also be carcinogenic. In fact, new legislation has been introduced (A.11659/S.8724) to require the NYS Department of Health (DOH) to reduce the maximum indoor air quality level for TCE by at least half, since at 5 micrograms per cubic meter (mcg/m³), the current NYS limit, is two orders of magnitude higher than the most protective limits set by such states as California, Colorado, New Jersey, whose TCE concentration limits range from .016 to .02 mcg/m³.
Who is Affected by the New Disclosure Law?
The new law affects property owners or their agents who receive indoor air test results from an “Issuer” exceeding NYS DOH or federal Occupational Health and Safety (OSHA) guidelines for IAQ. 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. The new law defines an “Issuer” as a person subject to a legal Order for cleanup pursuant to (i) the hazardous waste site provisions of the ECL (Title Thirteen); (ii) the portions of the Public Health Law pertaining to hazardous waste sites (Title Twelve of Article Thirteen) or (iii) the sections of the Navigation Law regarding petroleum contaminated sites (Article Twelve).
An Issuer can also be a municipality, if it is subject to a contract pursuant to a State Assistance Program under the ECL. If such municipality obtains sample results of IAQ exceeding guidelines, and provides such information to affected property owners, those property owners or their agents must notice their tenants and occupants of such IAQ contamination. The municipality may have to notice the tenants directly, if the municipality were itself the property owner. Lastly, “Participants” in the NYS Brownfield Cleanup Program (BCP) are also obligated to notify tenants of laboratory validated adverse IAQ. 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 appear to require “Volunteers” in the BCP (i.e., parties not responsible or affiliated with those responsible for a property’s contamination) to notify tenants of adverse IAQ.
It is important to note that the Issuer and the property owner may, but need not be, one and the same party. This creates certain gaps in this law. For example, a property owner may lease a premises to a tenant/operator who has received IAQ contamination results, yet, unless the property owner is informed by that tenant/operator of the adverse IAQ, the owner may not have knowledge of such a condition. Interestingly, although there is an obligation for the property owner to inform its tenants, there is no obligation for the tenant/operator to notify the property owner of IAQ contamination. Likewise, IAQ at a premises may become contaminated from activities on a nearby property. As the law is currently drafted there appears to be no obligation under this new law for the nearby property to notify other affected property owners or their agents. However, if the property owners or their agents do receive that information, this triggers the obligation for them or their agents to notice their tenants and occupants.
What Form of Notice Must Land-lords Provide?
If a property owner obtains test results from an Issuer indicating that a given property has indoor air contamination levels in excess of applicable DOH or OSHA guidelines, within fifteen (15) day s of receipt of such test results property owners or their agents must (i) give tenants and occupants a Fact Sheet that identifies each contaminant present of concern as well as the legal limits for that contaminant; (ii) provide tenants and occupants with general health information regarding IAQ; (iii) inform tenants and occupants of health risks associated with exposure; and (iv) provide tenants and occupants with the means to obtain more information (e.g., direct them to contact their State or County Health Department). The DOH and the DEC is in the process of developing generic Fact Sheets that will presumably supply this required information. Accordingly, it is important that property owners and landlords contact their attorneys to help them draft appropriate tenant notices should they be needed. Landlords also need to provide timely notice to tenants and occupants of any public meetings required to be held to discuss the test results and provide copies of test results and/or closure letters within fifteen (15) days of any requests made by tenants or occupants.
If a property owner is subject to monitoring pursuant to an ongoing remediation program or for which IAQ mitigation has already been installed – such as a vapor barrier or a sub-slab depressurization unit – the owner or its agent must provide prospective tenants with a Fact Sheet and, upon request, test results, before the tenant signs 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 RE-SULTS – THE PROPERTY HAS BEEN TESTED FOR CONTAMINATION OF INDOOR AIR: TEST RE-SULTS AND ADDITIONAL INFORMATION ARE AVAILABLE UPON REQUEST.”
What Property Owners and Lessees Need To Do
In addition to those seeking to purchase a property, prospective lessees of commercial property should – now more than ever – conduct environmental due diligence of properties before renting. They should affirmatively inquire if the property they are seeking to lease is subject to any environmental enforcement action or Order by the DEC or DOH before executing any binding agreement. In addition, their attorneys would be wise to require representations and warranties from the landlord regarding safe environmental conditions, including IAQ issues. Lessees should also negotiate clauses that give them the right to terminate the lease, abate the rent and/or expressly allocate the 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.
Landlords will have to include the aforementioned warning provision in new leases, if they qualify as being affected by this new law. Property owners should be cautioned against voluntarily submitting to IAQ testing absent being required to do so by a regulatory agency, as this creates a universe of potentially damaging data. If a property owner or landlord chooses to voluntarily conduct IAQ testing, they should at least endeavor to protect the findings of such sampling by structuring the testing to be conducted under attorney-client privilege. Property owners and their agents should also consult environmental counsel to draft cogent and compliant notice forms to tenants.
Timely and appropriate risk communication of indoor air quality is key, as even the perception of adverse indoor air conditions can be very emotional and easily misconstrued.
Finally, both owners and lessees should consider purchasing environmental insurance to provide an independent source of financial recovery in the event of damages from adverse indoor and other site-specific environmental conditions. These liabilities are typically excluded from general liability policies. It is also a good idea to specifically negotiate as part of the policy the ability to be defended by environmental counsel of your own choosing 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, Esq. is a Partner and Chair of the Environmental Law Practice at Garfunkel, Wild & Travis, P.C., which has offices in Great Neck, New York, Hackensack, New Jersey and Stamford, Connecticut
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