Legal Viewpoint: Ten Things Affecting Today’s Property Deals

“One size does not fit all…whether it’s panty hose or environmental due diligence.”

At last week’s EDR Due Diligence at Dawn event in Chicago, I had the pleasure of introducing well-known Chicago environmental attorney, Lynn Grayson, a partner in the environmental law firm of Nijman•Franzetti LLP. After encouraging all of us to give thanks to CERCLA for its role in giving rise to an industry dedicated to identifying and mitigating property contamination risk, Grayson made this observation about how attitudes have evolved over time:

“Twenty years ago, an environmental risk was a deal-breaker, but today it shouldn’t be. Environmental risks are now something that can be managed in ways that are in line with your clients’ tolerance.”


Below is Grayson’s list of the top ten issues, including new policy updates, that are relevant to many commercial real estate deals she’s been involved in this year:   



Think PFOS, PFOA and 1,4 dioxane. New names for new risks that are not yet fully understood. Some are tied to specific operations. Among its many other uses, PFAS, for example, is a by-product of firefighting foam often linked to military bases. The problem with emerging chemicals is that the science is still evolving, so they create uncertainty, which is bad in a deal context. It is hard to quantify the risk without knowing what the cleanup standards might be down the road. The Illinois EPA is currently proposing a new Part 620 groundwater standard of 0.07 ug/L for PFOA/FPOS and possibly adding to water supply sampling program requirements. A number of states have already established groundwater and water supply thresholds for 1,4 dioxane. So what’s an environmental professional to do?

“Make your clients aware of the potential risk and uncertainty especially at properties with operations known to be associated with these chemicals.”


Under CERCLA and the Brownfields Act, property owners have three avenues of liability protection: as an innocent landowner, a contiguous property owner and a bona fide prospective purchaser. This year, the BUILD Act of 2018 included a provision that expanded the BFPP protections to qualified tenants. (Previously, the U.S. EPA relied upon its enforcement discretion to provide BFPP protection to qualified tenants.) The new update makes it clear that tenants who lease contaminated properties can qualify as BFPPs and minimize the potential for CERCLA liability traditionally imposed upon owners and operators. To qualify, parties must conduct All Appropriate Inquiries in the form of having a Phase I ESA conducted by a qualified environmental professional, as well as meeting other legal requirements (see the U.S. EPA’s AAI rule at 40 CFR Part 312). As a result of the clarification provided by the BUILD Act of 2018, AAI-compliant Phase I ESAs may become more common in commercial and industrial leasing.


During the course of routine environmental due diligence, a consultant may uncover other risks that present environmental liability exposure to a client (e.g., compliance issues).

“The best time to find environmental issues is when you’re negotiating and before closing. The U.S. EPA came out with enhancement policy in May reminding everyone that they have a new owner audit policy: if you find a problem, you can disclose it voluntarily and get your penalty waived if certain conditions are met.”

Under the policy, parties are encouraged to voluntarily discover, promptly disclose, expeditiously correct and take steps to prevent the reoccurrence of environmental violations. Self-disclosures meeting U.S. EPA requirements eliminate 100% of the gravity-based civil penalty and allow the Agency to waive civil penalties associated with economic gain.


Soil vapor intrusion risk is a new issue similar to emerging chemicals.

“Twenty years ago, vapor risk didn’t receive a lot of focus, but in the last five years or so, vapor has become part of every cleanup issue my clients undertake. Soil vapor intrusion has emerged as a key environmental due diligence consideration in site cleanups and redevelopment projects. This exposure pathway is one that federal and state agencies are very focused on.”


We’re in a great commercial real estate market right now with a lot of positive things happening. There are also a lot of different clients out there needing different things.

“One size does not fit all whether it’s panty hose or environmental due diligence. Clients need different things. If they don’t use financing, or in a deal where a site has already been studied to death, completion of a Phase I ESA may not be the right course of action. Parties to a merger or stock deal may not benefit from  BFPP protections so a Phase I may be less relevant, unless contractually required or requested by a lender. Or maybe you have a client who needs a site in a particular location so badly that the deal is going forward regardless. In these cases, it’s important to consider other possible options.”


Environmental insurance coverage often plays a vital role in managing environmental risks by mitigating potential liabilities. Despite market fluctuations, third-party coverage is readily available in 3-, 5- and sometimes 10-year policies with self-insured retention in the $50,000-$100,000 range for $10M-$20M in coverage.

“I first came to environmental insurance as a skeptic, but since then, I’ve come full circle. I want the deal to happen and insurance is a way to bridge the gap. And it’s not as expensive as you may think. Environmental insurance can work especially in instances of potential off-site liability.”


With environmental due diligence, there are all kinds of costs. Private equity firms get it and understand, but other types of client may not be as knowledgeable. “It’s important not to lose sight of the hidden costs that may be there, and to factor them into any environmental risk management strategy.”

For instance, the Illinois state EPA Site Remediation Program costs $10,000-$15,000 per site, so if it’s a small deal, that can be significant. Also, be aware of source of funding like the Illinois Drycleaner Environmental Trust Fund.

“Many people think the IL Drycleaner Trust Fund is defunct, but the reality is people are still using it. The fund is funded through 2020 so there could be money there in certain instances if a drycleaner paid into the account.”

Below are some of the issues that get lost in the shuffle, but are very common and can hold up the deal if they catch the buyer unaware:

  • IEPA SRP costs $10,000-$15,000
  • Hidden costs (hazmat disposal, used/discarded equipment/machinery, underground process lines, septic fields)
  • Groundwater ordinance
  • Soil, groundwater or soil vapor sampling
  • IL Drycleaner Environmental Trust Fund—other sources of funding
  • Expedited timing to meet deal or construction schedules


After the Phase I ESA is delivered, there are other types of issues that could become costly for the client. Asbestos-containing materials, for instance, could create complications and delays for a client who plans to demolish a building. The same applies to buildings with lead-based paint and the other issues on the accompanying slide.


Heightened community involvement in the redevelopment of properties can impact a property deal.

“Some sites are more sensitive than others. If a site is in middle of a residential center with a day care nearby, that’s a different situation than if your client is looking at a site in an industrial park with 30 other companies.”

Environmental matters will take on a different posture on deals involving active community engagement from environmental groups and/or plaintiffs’ lawyers so it is critical to understand if a target property is of special interest or concern to the community or nearby residents.


Any consultant working in the Chicago area may recognize this list of headline-makers:

  • Stormwater Management—Chicago River
  • Ethylene Oxide–Willowbrook
  • Water Quality/Scarcity—Peoria and Northern Illinois
  • Manganese—Chicago Southeast Side
  • NEPA—Amtrak Hiawatha Service Expansion Chicago to Milwaukee
  • Water Scarcity—Great Lakes’ Water Allocation for New Wisconsin Industry

“These are all issues that created hardships for these clients so they represent examples of cases when the environmental professionals would have needed to do more in the environmental due diligence process.”


EDR Insight wishes to thank Lynn Grayson for her valuable contribution to our Chicago DDD program.

About Lynn Grayson 

Lynn Grayson is a partner in the environmental law firm of Nijman•Franzetti LLP, in Chicago. She is consistently recognized as a leading environmental lawyer by Chambers USA, The Best Lawyers in America, Illinois Super Lawyers and the Leading Lawyers Network. She is AV Peer Review Rated, Martindale-Hubbell’s highest peer recognition for ethical standards and legal ability. Ms. Grayson is the immediate past chair of Jenner & Block’s environmental department. She has served as the Chief Legal Counsel for the Illinois Emergency Services and Disaster Agency and the State Emergency Response Commission. She also has prosecuted federal and state environmental cases as an Assistant Attorney General for the State of Illinois.

Grayson has an outstanding reputation in the transactional sphere, advising clients on regulatory compliance, risks and liabilities, due diligence and enforcement matters in both a domestic and international context. She also serves on the Board of Directors of the DC-based Environmental Law Institute.