PCBs Could Pose Risks for Property Buyers and Sellers, and Affect Values

PCBs Could Pose Risks for Property Buyers and Sellers, and Affect Values

Feb 14, 2011 9:19 AM, By Tricia H. Foley, Esq. and John B. Hankins, LEP, NREI Contributing Columnists

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Polychlorinated biphenyls, known as PCBs, are man-made organic chemicals manufactured in the United States from 1929 until they were banned in 1979 because of indications that they cause cancer and have other serious health consequences.

During that time, approximately 1.25 billion pounds of PCBs were manufactured in this country. PCBs are commonly associated with old transformers and electrical equipment. But during their period of manufacture, and particularly between 1950 and approximately 1978, the chemicals were used in a variety of building materials because of their insulating and elastic properties.

For instance, they were used in caulk, grout, paint, architectural coatings, adhesives, and insulation such as fiberglass and foam rubber, and in ceiling tile coatings. PCBs could also be found in HVAC gaskets and waterproofing compounds, as well as roofing materials.

As if that weren’t enough, PCBs can migrate to surrounding building materials and soil. They can lurk in dust, and even become airborne. Recently, the issue of PCBs in window caulk, particularly in school buildings, has drawn significant attention from the U.S. Environmental Protection Agency (EPA).

PCBs are primarily regulated under the Toxic Substances Control Act (TSCA), but may also fall within the Resource Conservation and Recovery Act (RCRA) and other federal and state environmental statutes depending on where they are found, and in what concentrations.

Currently, owners are not expressly obligated by federal regulations to test for PCBs in building materials, and the methods best suited for detecting PCBs vary based on the type of building material and its condition. Building owners, sellers, and buyers can manage risks associated with PCBs by working with a qualified consultant familiar with PCB detection, and by learning their obligations if removal and disposal of contaminated materials is necessary.

Hazards could involve liabilities

The presence of PCBs in old buildings may pose substantial risks to buyers and sellers. It may affect valuation of the building, along with warranties related to environmental hazards, liability to tenants, requirements for lender assessment and assurances. They may even have tax and insurance implications.

Buyers and sellers should understand when and how to test for the presence of PCBs and how to dispose of PCB-contaminated building materials. Following are additional considerations:

• If PCBs are extensive and exceed the health and safety thresholds set by the EPA, removal and disposal could be time-consuming and expensive, especially if those PCBs are airborne and have

• Owners should consider the potential liability to tenants arising from exposure to toxic PCBs in the building.

• A seller who warrants a building is free from contamination or environmental hazards may find himself in breach of that warranty if the buyer later discovers PCBs.

• Lenders may require assessments or assurances related to the presence of PCBs.

• There could be tax implications for undertaking a PCB removal project, rather than removing the chemicals as part of renovation or remodeling.

To Test or Not to Test

Owners and developers face a dilemma when considering whether to test building materials. For the owner, testing could trigger a mandatory report to the EPA and a requirement to conduct a large and expensive remedial project that would not have been required had the samples not been collected.

Although there is typically no obligation to test building materials for PCBs, testing has become more common as a step in the pre-acquisition due diligence process. It has also become part of pre-demolition assessments, particularly since there are substantial fines for disposal of PCB-containing waste at an unlicensed facility, even if the generator or facility was unaware of the presence of the PCBs.

There are three basic types of PCB testing: air samples, wipe samples and bulk samples. The first phase of testing is to cost-effectively determine the presence or absence of PCBs in the building materials. If PCBs are detected during the initial screening, more extensive testing may be required to determine the extent and the range of concentrations. The EPA typically requires samples on a 10-ft. grid. Large buildings could require hundreds of samples.

Removal and Disposal

The presence of PCBs at concentrations above 50 ppm, which is common for caulk, triggers a mandatory report to the EPA, which in turn triggers a mandatory requirement to remediate the condition.

The process of abatement of PCBs in building materials can be quite complex and expensive. For caulk, which can contain 3% or more of PCBs (30,000 ppm), it is common to find that the PCBs have migrated from the caulk into the surrounding building materials. When this occurs, the remedy needs to address not just the caulk but any building materials that contain more than 1 ppm for most occupied buildings. In some cases the contaminated materials must be transported across state lines for disposal.

Owners and developers must understand and deal with the consequences of current state and federal regulations. Although these regulations have been in effect for decades, the regulators and regulated community have only recently realized the extent to which PCBs occur in building materials and the practical and fiscal implications that this is having on the construction industry.

The best advice, whether you are an owner or a developer or both, is to understand these implications and to plan in advance. Plan before you buy, plan before you renovate, and perhaps most importantly, plan before you sample.

Tricia H. Foley

Tricia Foley is a partner in the real estate and environmental law department at Day Pitney LLP in Hartford, Conn. Her practice includes the business and regulatory aspects of environmental law, including green and sustainable business practices and carbon reduction programs. Ms. Foley has been an adjunct professor of environmental law at the University of Hartford, and is a frequent author and speaker on environmental topics.

John Hankins directs the Environmental Due Diligence Group at Fuss & O’Neill, in Manchester, Conn. His practice focuses on transaction-related environmental assessments as well as the assessment and remediation of contaminated sites throughout the Northeast.