Periconi, LLC Environmental Law Blog

Environmental Due Diligence in Real Estate Transactions Blog Series: Part IV – Working with Environmental Consultants

2012-05-15T13:21:25Z

In our series highlighting the tools of environmental due diligence in real estate transactions, we’ve covered the basics of (1) what is “environmental due diligence,” (2) what are the important environmental provisions you need in a purchase and sale contract, and (3) what environmental investigations and audits you need to undertake after signing the contract. In this post, we’d like to discuss what to consider when selecting and working with the environmental consultant who, with the help of the environmental attorney, will be performing much of the due diligence work on the property.

Throughout this series, we’ve highlighted why it’s important to have an environmental attorney, and not just a real estate attorney, represent you when buying or selling a contaminated property. Another key reason to have an environmental attorney on board when buying or selling contaminated property is that he can act as a liaison between the environmental contractor or consultant and you, the buyer or seller. He can help you vet a proper environmental consultant and will work to ensure that the consultant is doing everything they are required to do but nothing unnecessary. Moreover, the environmental attorney can also act as a liaison between the environmental consultant and the governmental agency overseeing the remediation of the property, thus ensuring that your interests are protected but are not being taken advantage of.

Environmental Consultants: issues to consider: choice of consultant, scope of work, contract, and procedure.

Several factors that are important to consider when choosing and working with your environmental consultant who will undertake your environmental due diligence: education, experience or expertise of the type relevant to the client’s needs, the consultant’s reputation with government agencies, references from others, report-writing abilities, and rates.

In addition to undertaking or overseeing the environmental due diligence or remediation of the property, the environmental consultant is responsible for drafting all necessary environmental reports, in order to not only satisfy the ”all appropriate inquity” standard, but also to give the prospective buyer an understanding of the level of contamination on the property.

Prior to even a draft report (e.g., a Phase I ESA or Phase II ESA report), the environmental consultant and the environmental attorney should be in regular contact, and should discuss the results of the assessment orally and how the environmental consultant plans to present the results. There is a need for good working relationship between the environmental consultant and the environmental attorney, so that the consultant understands that the attorney may need to edit to account for legal concerns and the attorney understands that the consultant may have to refuse if attorney edit is technically inaccurate. (Another benefit of hiring an environmental attorney is that he or she can officially retain the environmental consultant and therefore any reports can be protected under the attorney/client privilege.)

Following the oral report, discussed above, the environmental consultant should prepare a draft report, insuring the report is limited as much as possible to factual observations. There should be no conclusions or opinions, e.g., about status of regulatory compliance or speculations on the sources of potential contamination. The report should not be finalized until the attorney has reviewed the revised draft (if attorney revisions are anything other than minor editing, spelling corrections, etc.).

Similar to concerns of confidentiality with releasing environmental reports to a prospective purchaser, there also may be confidentiality issues with allowing an environmental consultant to review prior environmental reports and/or inspect the subject property. Confidentiality issues should be addressed in a separate agreement, usually before the environmental consultant undertakes any work.

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Please contact us if you have any questions about environmental due diligence in real estate transactions, or if we can help you select or work with an environmental consultant to perform a Phase I ESA, Phase II ESA, compliance audit, or remediation on your property.

This blog series is based on an article written by James J. Periconi and published in the Winter 2008 Bloomberg Corporate News Journal. Mr. Periconi also discusses the details and the nuances of environmental due diligence of commercial real estate transactions in his bi-monthly continuing legal education course.

Environmental Due Diligence in Real Estate Transactions Blog Series: Part III – Environmental Site Assessments and Compliance Audits

2012-05-07T17:39:39Z

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So now you’ve selected your property and have a proper purchase and sale agreement in place; what do you do next?

A. Protecting Yourself from Potential Liability

Under CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act) there is a broad range of parties with a connection to the site that could be responsible to clean up the contamination. These parties are known as “potentially responsible parties” (“PRP”s) and include:

present owners or operators;
past owners or operators of the site at the time of disposal of the hazardous substances;
any transporters of such hazardous substances; or
any party who arranged for disposal at the site, and any transporters that carried hazardous waste to the site.

This is why environmental due diligence is critical: if done properly, you can protect yourself from liability under CERCLA just because you are the present owner of a contaminated property.

Defense vs. Exemption from Liability for Current Owners of Contaminated Properties

There are only three defenses to liability: act of God; act of war; and the “third party” defense, which is denied to a person having a contractual or agency relationship with the PRP. The third party defense can apply to PRPs who, at the time they acquired the contaminated property, did not know and had no reason to know that the property was contaminated.

To establish that the PRP had no reason to know, at the time of the acquisition of the contaminated property, he must undertake “all appropriate inquiry” into the previous ownership and uses of the property “consistent with good commercial or customary practice” in an effort to minimize liability. The all appropriate inquiry or “AAI” standard recognizes the revised ASTM standard, ASTME 1527-05 (i.e., the 2005 standard), as an acceptable guidance document for generally satisfying AAI inquiries.

There is also one exemption from liability – not merely a defense – “bona fide prospective purchasers” (or “BFPP”) who have undertaken AAI into past uses of a property and find that contamination is present. Notwithstanding the strict liability of current owners and operators under CERCLA, this BFPP exemption provides:

A bona fide prospective purchaser whose potential liability for a release…is based solely on the purchaser’s being considered to be an owner or operator of a facility shall not be liable as long as the bona fide prospective purchaser does not impede the performance of a response action or natural resource restoration.

Clearly, neither the third party defense nor the BFPP exemption applies if the current owner actually caused the contamination of the property.

B. Practical Aspects of Deciding What Kind of Environmental Site Assessment You Need

Before undertaking an environmental site assessment (“ESA”), it is crucial to determine the right kind of information you need to develop about the property or facility for, among other things, showing the property conditions at the time of sale. An accurate picture of property conditions, in addition to overcoming the fear and insecurity that comes with facing unknown and therefore frightening problems, also facilitates the contract negotiations, because parties are less likely to posture about theoretical protections or guarantees they think they need, and instead focus on the most likely concerns.

1. Phase I Environmental Site Assessment:

A proper Phase I ESA – that is, one that follows the applicable ASTM standards – will provide you with satisfaction of the AAI standards by a prospective purchaser in order to qualify for the BFPP exemption to liability under CERCLA.

See here for more on Phase I ESAs.

A conservative reading of the BFPP requirement suggests that a Phase I ESA, to suffice for BFPP protection, also requires a lien search that is typically additional to what has traditionally been required in Phase I ESAs.

2. Phase II Environmental Site Assessment:

While a Phase II ESA is not technically required to gain protections under the BFPP exemption to CERCLA liability, it is a critical step for any prospective purchaser of contaminated property.

See here for more on Phase II ESAs.

Note that the Phase II ESA should never be performed before first undertaking a Phase I ESA because the purpose is to further investigate the potential areas of environmental concern (or “recognized environmental conditions”) identified in the Phase I ESA. Without having completed a proper Phase I, the Phase II will lack sufficient direction, or, more typically perhaps, it may focus on only a single problem that “everybody knows” is there, missing the other issues that only a Phase I ESA will uncover; the persons undertaking the Phase II ESA may well fail to investigate problems requiring an investigation, and, therefore, the resulting Phase II ESA may not be a reliable document.

C. Compliance Audits

A compliance audit is required only for properties that contain operating facilities that are known to have environmental permits. It is important because it gives you an understanding of the environmental regulatory compliance (or non-compliance) of operations on the property. It requires an in-depth examination of facility operations and detailed review of environmental (and related) permits, monitoring records and other documents not obtained and/or not reviewed thoroughly on the Phase I ESA process, except for what may perhaps be found, as a past violation, on a data base report. A compliance audit review must include an examination of all air emissions, discharges into all water bodies, waste management and cleanup, Community Right-to-Know compliance, Toxic Substances Control Act issues, asbestos, lead, radioactive materials, and worker safety. The compliance audit report should also detail how well, in the past, significant facility operational and environmental permit deficiencies have been remedied.

When the seller’s facility on the property will continue operation after the buyer closes, the parties may chose to transfer any permits from the seller to the buyer. Issues arise, however, if there are previously unresolved matters, such as consent orders with continuing obligations; for example, quarterly well monitoring, which the seller has recently “forgotten” to do. The federal or state environmental agency will likely take the position that either party can fulfill any agency requirements, as long as the terms of the consent decree are met. The buyer and seller will have to determine in the contract for sale what party must fulfill prior unresolved permit obligations. (If the buyer is likely to be subject to successor liability requirements by virtue of the nature of the deal, those liabilities may pass by operation of law.) In counseling buyers, we recommend that they attempt to resolve the issues, pre-closing, first, to determine how intractable the problems may be, but also for the better reason that one or two meetings with relevant government agencies can help determine whether the facility has such a bad reputation with regulatory officials that you may want to rethink the decision to purchase.

D. Access and Confidentiality Agreements

A “site access agreement” will become necessary if the prospective buyer wants to undertake either a Phase II ESA, with its invasive work, and even more so, if the parties agree that the buyer may undertake pre-closing remediation. It is also necessary if the prospective buyer wants to do a compliance audit.

There are several issues to be mindful of if your client is asked for access:

Do not allow invasive work on your client’s property unless there is a firm basis in a Phase I ESA;
Insist on minimal disruption to your client’s (or his tenants’) operations: e.g., require flush mounted wells where periodic monitoring of groundwater is required, rather than wells that stick up a few inches or feet above the ground
Make sure there is adequate insurance, and the right parties are named;
Require robust indemnifications by party seeking access, to back up assumption of risk; and
Require clear property repair and site restoration provisions.

A confidentiality agreement may be necessary (1) before disclosing environmental reports to the prospective buyer, for example, to prevent further dissemination or where trade secrets are involved; and (2) before permitting a compliance audit to be performed. Additionally, the seller may want a confidentiality agreement in place with the environmental consultant.

Some issues to consider in this situation are:

Non-disclosure except with client consent;
Exclusions from coverage;
Degree of resistance to disclosure; and
Scope of non-disclosure.

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Please contact us if you have any questions about environmental due diligence in real estate transactions, if you’re seeking to obtain the “bona fide prospective purchaser” exemption from liability under CERCLA, or if we can help you through the environmental site assessments, compliance audits, or access agreements associated with the purchase or sale of a contaminated property.

EPA Proposes Limits on Greenhouse Gas Emissions from Power Plants

2012-04-26T14:05:01Z

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On April 13, 2012, the US Environmental Protection Agency (EPA) published its proposed a draft New Source Performance Standard (NSPS) regulation under Section 111 of the Clean Air Act (CAA) that will cover carbon dioxide (CO2) emissions from new sources in the category defined as new “electric utility generating units,” or EGUs.

“New EGUs” are defined by the proposed NSPS regulation to include “any steam electric generating unit or stationary combustion turbine that is constructed for the purpose of supplying more than one-third of its potential electric output capacity and more than 25 MW net electrical output to any utility power distribution system for sale,” (with some exceptions) which is built (or modified) after the date of publication of the proposed regulations, e.g., April 13, 2012. However, EPA has provided a one year extension of the effective date, which, for example, would allow a new coal-fired EGU with an approved pre-construction permit that has begun construction before April 13, 2013 to not be subject to the new NSPS standard. And although the definition of EGUs includes modifications to exiting units, in the proposed regulation EPA stated that it does not have enough information to regulate modifications or reconstructions of existing EGUs and, consequently, will instead regulate only brand new units; this decision takes the issue of what level of work constitutes a “modification” – a highly litigated issue between EPA and industry – off the table for this proposed NSPS.

These regulated new EGUs must meet an emissions rate of “454 kilograms (kg) of CO2 per gross output in Megawatt hours (MWh) (454 kg/MWh) (1,000 lb/MWh) on a 12-operating month annual average basis,” except for new coal or petroleum coke units, which are designed to allow installation and operation of a carbon capture and storage system. For those units, the applicable standards are:

For the first 10 years of operation, an emissions rate of 816 kg/MWh (1,800 lb/MWh) gross output on a 12-operating month annual average basis; and
Beginning in the 11th year of operation, an emissions rate of 272 kg/MWh (600 lb/MWh) gross output on a 12-operating month annual average basis; and
Over the entire 30-year average period, an emissions rate of 454 kg/MWh gross output (1,000 lb/MWh) on a 30-year average basis.

Applicable emissions rates are in force at all times of operation, including startup and shutdown.

The proposed emissions rate is a technology-based standard based on measured performance of natural gas combined cycle plants, which EPA finds to be the system that yields the least greenhouse gas emissions and which EPA has stated will be “the facilities of choice until at least 2020.” Because compliance is at the unit level, there is no alternative to meeting this standard, for example, by procuring credits under a cap and trade system; regulated EGUs cannot comply by averaging their emissions with other EGUs or through trading programs.

The proposed rule is now open for public comment until June 12, 2012.

Environmental Due Diligence in Real Estate Transactions Blog Series: Part II – Contract of Sale of Real Property

2012-04-18T15:49:08Z

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In our first post in this blog series, we explained exactly what is meant by the term “environmental due diligence” in real estate transactions and discussed some of the “tools” of environmental due diligence. In this post, we’ll cover in detail one of those tools: the contract of sale for real property.

Why is the contract so important?

Some consider the environmental site assessment process alone to be adequate environmental “due diligence,” but contract drafting is integral to the success of the overall environmental due diligence process. Drafting appropriate contact provisions and establishing the property’s baseline environmental conditions are central to the desire by buyer and seller to get the benefit of their bargain and minimize unnecessary exposure to liability.

Parties can use their knowledge of environmental conditions on the property to better allocate liabilities in the contract of sale, and thus to some extent “fix” their expectations realistically, minimizing later problems. Proper contracting also helps establish certain statutory exemptions against statutorily-imposed liability, should a problem arise after the closing. To do this properly, each side in the transaction requires an environmental attorney who is knowledgeable about federal andNew YorkStateenvironmental statutes, as well as common law background principles.

Important contract provisions.

Before getting into the specific language, we will review the functions of the several types of contract provisions that can be found in a contract of sale and why these provisions are an important part of environmental due diligence.

A representation is a statement of fact made to induce another party to enter into a contract. A warranty is a promise that the statement is true; intended to relieve the buyer from having to determine if the facts are true. A covenant is a promise by a party to perform certain tasks, e.g., to correct environmental problems uncovered during the due diligence period, obtain No Further Action Letters or other government approvals, close inactive tanks, or do remediation. Lastly, an indemnity is a full and complete shifting of liability to another party.

Representations and warranties help the seller organize its disclosures and records, help the buyer focus its due diligence effort by identifying and quantifying the environmental liabilities, and help the parties allocate environmental risks and obligations. However, representations and warranties should not be relied on as a substitute for including an indemnity provision in the contract that will specifically allocate liability, nor should they be a substitute for undertaking the necessary due diligence through the environmental site assessment process.

The scope of an indemnification provision is often a troubling issue. From the buyer’s perspective, it is better to have a stand-alone environmental indemnity that states those specific matters for which the seller must indemnify the buyer, usually presented as a schedule annexed to the contract that lists all the known environmental conditions. Business and real estate counsel need to work with environmental counsel (and vice versa) to ensure that the environmental indemnity provision harmonizes with the contract of sale’s general indemnity provision

Furthermore, if you are the buyer, environmental counsel should help determine – and explain to you – whether there are pre-existing indemnity agreements affecting the assets you want to purchase, e.g., did the seller agree to assume certain liabilities when it acquired the business it is now selling, or did a previous seller retain environmental liabilities?

Examples of specific environmental language in purchase and sale contracts.

As part of the overall environmental due diligence process, it is important to ensure that certain provisions – such as those discussed above – and certain specific language – such as that listed below – are included in a purchase and sale contract for contaminated properties. Fortunately, on the Periconi, LLC blog, we’ve already highlighted most of the specific language that we recommend including in any purchase and sale contract. Therefore, the following discussion includes links to those previous posts.

A. Environmental Representations and Warranties

Before the parties can set forth representations and warranties, it is important to define the terms that will be found in those contract provisions.

1. Definitions:

a. Hazardous Materials

b. Environmental Requirements

c. Environmental Claims or Environmental Damages

d. Material Adverse Effect or Adverse Environmental Condition

2. Representations:

a. Inducement/Best Knowledge

b. Compliance with Laws/No Violations

c. Representations: All Required Permits

d. No Hazardous Substances/Hazardous Waste/Hazardous Operations on Property

e. No Notices or Knowledge of Basis

f. No Asbestos, PCBs, or Underground Storage Tanks (USTs)

g. “As Is” Clauses

B. Pre-Closing and Post-Closing Covenants

1. Maintenance of Representations and Environmental Site Assessments

2. Borrower’s Covenants

C. Indemnities

The indemnity provision provides even greater security for a party than do representations and warranties alone. Great care should be taken in drafting, and reviewing, the environmental indemnity provision in your contract.

The environmental indemnity should cover the following occurrences:

The presence in, on or under, or the escape, seepage, leakage, spillage, discharge, emission, disposal or release from, the property of any Hazardous Materials.
Environmental Claims asserted or arising under any Environmental Requirements.
Any representation by seller (or borrower) being false or untrue in any material respect.

Additionally, the indemnity should address the following issues:

Should the indemnity be made by the party alone, or by that party and its successors, assigns and guarantors?
Should the indemnity extend to any successor or assign who acquires an interest in the property or otherwise succeeds to the rights of the buyer or lender under the agreement?
Should the indemnity cover the directors, officers, shareholders, employees, partners, agents, contractors, licenses, affiliates, lessees, mortgages and invitees of the indemnitee?
Should the indemnity create an exception for the negligence or willful misconduct of the indemnitee?
Should the indemnity be limited to a fixed amount of money?
Should the indemnity survive for a fixed amount of time?
Should the indemnified party have the right to approve counsel retained by the indemnitor?

D. “Walk-Away” and Post-Closing Cost-Sharing Provisions

1. Environmental Site Assessment (“ESA”)

(For a summary of the processes and requirements, click here for Phase I ESAs and here for Phase II ESAs.)

Any pre–closingESAcontingency must provide a right for the buyer (or lender) to walk from the deal if the assessment reveals risks which the buyer is unwilling to take. The buyer will want such a determination to be solely within their discretion, while the seller or borrower will want to limit that discretion to risks of “Environmental Claims” that may be reasonably said to give rise to “Adverse Environmental Condition.”

A basic format is to require that if the assessment reveals any violations of “Environmental Requirements” or other environmental exceptions, it is the obligation of the seller (or borrower) at its sole cost and at its sole discretion to remediate the exceptions. If the seller decides not to remediate, then the buyer may terminate the agreement by sending a written notice of termination to the other party. The time in which such a remediation must occur or such notice be delivered should be limited to assure finality of contract. And, even where the seller is willing to remediate, a time limit or re-opener may be needed to assure that the buyer is not locked into an unreasonable extension of the closing date.

Finally, confidentiality of the ESA report will be of importance to all parties, but particularly to sellers. The buyer must agree to maintain absolute confidentiality of the report, to the extent permitted by law, until buyer has accepted transfer of title from the seller.

2. Cost-Sharing

Where “Adverse Environmental Conditions” are anticipated, the parties may agree in advance to an apportionment of the cost of the Phase I and II ESAs, the cost to remediate, and the cost of consultants. However, this is generally difficult to do unless the site has been thoroughly assessed. Even a Phase II ESA (which includes soil and groundwater sampling) may not be adequate to provide the parties with knowledge of the full extent of environmental problems at the site.

Cost-sharing provisions limit the obligation of the seller. These limitations can be coupled with an obligation for the seller to remediate the environmental exceptions, with the knowledge he or she does not have an unlimited contingent liability. Therefore, if cost-sharing is utilized, a monetary cap is usually imposed on the seller’s obligations. As with the pre–closing ESA contingency, the parties may agree to share the cost of consultants and the remediation according to a pre-established allocation formula.

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Please contact us if you have any questions about environmental due diligence in real estate transactions, or if we can help you draft or understand the environmental provisions of your own real estate purchase and sale contract.

Environmental Due Diligence in Real Estate Transactions Blog Series: Part I – Introduction

2012-04-10T20:36:37Z

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This blog series is based on an article written by James J. Periconi and published in the Winter 2008 Bloomberg Corporate News Journal. Mr. Periconi also discusses the details and the nuances of environmental due diligence of commercial real estate transactions in his bi-monthly continuing legal education course. Although we’ve blogged about environmental due diligence in the real estate transactions before (see here and here, for example), we decided it was time for a refresher series, including legal updates and discussion of new and exciting topics.

What is “environmental due diligence”?

“Environmental due diligence” in the context of a real estate transaction is the process used to identify and assess the risk of environmental liability associated with the transfer of contaminated property. The primary goal in undertaking environmental due diligence is to protect buyer or seller as against the other party, or – sometimes even more importantly – against the government. It can also serve to provide lenders with the information they require for loans to decrease the likelihood of default on loan repayment or of a reduction in the value of collateral.

The parties to a property transaction need to perform this environmental due diligence because there is often strict liability imposed for cleaning up contaminated property, especially for the current owners of the property. Strict liability is a legal term which means that there does not need to be a showing of intentionality, culpability or even knowledge of the environmental problem for liability to attach. In brief, if you own the contaminated property, you usually own the problem…unless you have protected yourself by knowing the condition of the property when you buy it and by writing the proper protections into the contract of sale.

Thus, environmental due diligence is necessary for anyone who is considering purchasing contaminated, or potentially contaminated, property. In fact, in order to get protections from liability under some federal and state statutes, a prescribed due diligence investigation – or “all appropriate inquiry” – must be undertaken by a prospective purchaser.

What are the “tools” of environmental due diligence?

Think of environmental due diligence as a toolbox for minimizing or limiting liability associated with contaminated property: there are different “tools” in your toolbox that correspond to different aspects of environmental due diligence. One tool is knowing what the exemptions or defenses to statutory liability are, and whether or not you can avail yourself of them. Another tool is undertaking studies – or “all appropriate inquiries” – of the property, prior to purchasing a contaminated property. Another tool is allocating liabilities in just the way that the parties are willing to do so through contract drafting.

This blog series will introduce you to the different tools of environmental due diligence and will show you the ways in which you can wield those tools to your best advantage. Our focus, for ease of explanation, will be on how a prospective purchaser of a contaminated property can utilize the environmental due diligence tools. However, these tools can, and in some instances must, be used by sellers and operators of contaminated properties to protect their own interests as well.

But why do you need an environmental attorney?

Often buyers or sellers of property will ask whether their interests are protected with having a good environmental consultant working with a good real estate attorney, and whether an environmental lawyer actually needs to be retained. For the most part, the answer is yes; an environmental lawyer is crucial to this process for several reasons.

First off, environmental consultants are not lawyers and cannot – and should not – determine possible claims by or against their clients, and how to develop the scope of a Phase I Environmental Site Assessment or other property investigation to protect a client against any possible claims. They also cannot make legal judgments regarding government reporting issues. Furthermore, consultants have a vested interest in doing the most work they can persuade clients to engage them for, not so much to generate larger fees for themselves so much as to protect themselves against later claims that they failed to uncover a contamination condition. An environmental attorney can not only give you legal advice and protect your interests, but he can also act as a liaison between the environmental consultants and the clients. An environmental attorney can also act as a liaison between you and the governmental agency overseeing or requiring the cleanup, thereby ensuring that the property is remediated in a proper, yet cost-effective, manner.

Secondly, even the best real estate lawyers can not fully understand environmental law issues any more than environmental attorneys can the standard non-environmental real estate issues in your contract. In our experience, real estate lawyers working without environmental counsel often defer far too much to the expertise of the environmental consultant (which, as we mentioned above, could lead to some serious legal problems) or sometimes even the governmental agency (whose goals are not always in line with the client’s best interests). They do not always admit that they lack more than a casual appreciation of what the results of analytical tests actually mean in practice (e.g., believing that soil or groundwater sample results showing contamination mean that remediation or even reporting to the government is necessary; it’s not always). Therefore, just as you wouldn’t hire a trust and estates attorney to review your purchase contract in a real estate deal, you shouldn’t have your real estate attorney review the environmental provisions in the purchase contract.

Please contact us if you have any questions about environmental due diligence in real estate transactions, or if we can help walk you through the environmental aspects of your own real estate transaction.

Conservation Buffer Sufficient to Defeat Petitioners’ Standing to Challenge Proposed Development

2012-04-03T14:37:49Z

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In a decision that highlights how strictly trial courts are construing the standing of prospective plaintiffs or petitioners, a State Supreme Court justice in Westchester County recently held that because of a land conservation buffer between existing homes and a proposed development that the petitioners were fighting, individual residents could not establish the “proximity” necessary to confer standing, i.e., the status needed to permit them to sue. In particular, the petitioners could not establish, in the court’s view, that they were harmed in a manner different from that of the general public; in other words, they lacked the particularized injury necessary to be able to challenge the project. See Matter of Tuxedo Land Trust Inc. v. Town of Tuxedo, 2012 N.Y. Misc. LEXIS 938 (N.Y. Sup. Ct. Mar. 5, 2012).

Background

Matter of Tuxedo Land Trust Inc. v. Town of Tuxedo arose from a lengthy battle over plans to build a new housing development that would add almost 1,200 new homes and in effect create a new community, with its own commercial “downtown area,” over about 10 years.

The land conservation “buffer” that was so important to the judge’s decision was a significant one: much of the 2,400 acres of land in the Town owned by the development company, TRO, would be preserved as open space, buffering existing properties from new construction. Two non-profit organizations, the Tuxedo Land Trust and the Torne Valley Preservation Association, as well as several individual residents, challenged a series of amendments that the Town approved to expand the project and would allow construction in this buffer area. (There were no challenges to the initial plan, which may have played a role in the court’s decision.) The petitioners asserted a dozen claims, ranging from environmental and cultural impacts to purported violations of the State’s Open Meetings Law.

Standing to Sue

In order to bring a lawsuit, a plaintiff or petitioner must show that they have the legal right to bring the case; that right is known as “standing.” In general, in order to show standing, the petitioner “must show that the in-fact injury of which it complains . . . falls within the zone of interests, which [the law] seeks to promote or protect, and that it would suffer direct harm, injury that is in some way different from that of the public at large” (internal quotations omitted).

Specifically, in cases such as this that involve a challenge to a town’s decision as a violation of the State Environmental Quality Review Act (“SEQRA”), persons or entities whose properties are “in close proximity” to the challenged development would have “a presumption that they are adversely affected by the alleged SEQRA violation and, accordingly, need not allege a specific harm” (citations omitted).

How the Court Arrived at Its Decision

The court limited its review to the Town’s approval of the amendments to the proposed development plan, not the original environmental approvals by the Town. These amendments increased commercial development space in one part of the project, altering the mix of housing types, permitting construction on a 32-acre parcel that had originally been proposed for permanent open space, and made other changes to the original plan. The court held that any alleged injury to the petitioners had to arise from the amendments and not the initial proposal, since it was these amendments which the petitioners were claiming caused their injury.

The court said that both the individual and organizational petitioners lacked the “presumption of standing” because they did not own land affected by the development, as their property was sufficiently sheltered and remote from the new development. Also important to the court was that petitioners did not even allege that they enjoyed the potentially impacted natural resources – the proposed open space within the development – any more frequently or enthusiastically than did the public at large.

Thus, because the petitioners lacked the presumption of standing and failed to allege any particular injury caused to them by the Town’s approval of the amendments, the court dismissed their case.

What’s Different about This Decision

It is nothing new that courts in the last few years appear to have become more and more hostile to the concerns of project opponents about proposed developments, finding, for example, that if a plaintiff was on the same side of a street as a proposed development, it couldn’t suffer an injury because it wouldn’t be able to see the project. See Save Our Main St. Bldgs. v. Greene County Legislature, 293 A.D.2d 907 (N.Y. App. Div. 3d Dep’t 2002)

What is novel about this decision is that the court found the proximity of the petitioners to the proposed project relates to the development itself, rather than simply to the land on which the development is included. In this context, it is far more difficult for would-be petitioners to show actual injury. Thus, the existence of a conservation “buffer” not only separated the would-be harmed petitioners from the actual areas of development that would give rise to the claimed injuries; the buffer was sufficient to defeat petitioners’ standing to demonstrate that the buffer was insufficient to insulate them from any ill effects of the development.