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Summary of the SBA’s SOP Environmental Policy Revisions in SBA SOP 50 10 5 (C)

The SBA published their latest update their environmental policy in SOP 50 10 5 (C).    The SOP revisions take effect on October 1st, 2010 we should all bone up on a few of the new elements of SOP 5010 5 (C) (pages 199 – 206 & 310 – 317).

One now technical, but important point, is that the Reliance Letter has had a revision and the Reliance Letter from SOP 5010 5 (B) will no longer be accepted by the SBA.   Lenders should make sure their environmental consultant knows of the new Reliance Letter before ordering an SBA Phase I Environmental Site Assessment.   

Overall the Environmental Requirement changes in this latest SOP were minor and summarized below.

  • For loans less than $150,000 where the Environmental Questionnaire comes back showing further investigation is required, you may now have a Records Search with Risk Assessment (RSRA) performed instead of having to go to a Transaction Screen Report.  SBA believed that this was more with the natural progression of reporting and therefore made this change.
  • When reviewing the NAICS Codes of Environmentally Sensitive Industries the code 8123 LAUNDRY & DRY CLEANING SERVICES it now will state if dry cleaning operations have ever existed on-site.  Prior to the revision it stated if dry cleaning operations on site.
  • In Section f) Mitigating Factors that SBA will rely upon to disburse before completion of remediation or monitoring, for section f) titled Escrow Account the new SOP clarifies two issues.  The first being that the money put into the escrow account can’t come from funds from the SBA loan itself.  The second clarification answers the question if the money in the escrow account can be used for the actual remediation itself or if it needs to stay in the escrow account until the remediation is completed.  Yes, it can be used for the remediation costs—similar to a construction loan.
  • In Section g) Groundwater Contamination Originating from Another Site, the revision to the SOP eliminates the sentence, “and lender can demonstrate that the contamination has not caused significant damage to the collateral value and marketability of the Property”.   They made this change understanding the lender really couldn’t demonstrate or comply with this requirement.
  • The Reliance Letter in appendix 3 has been modified by adding the words “as it impacts the property” at the end of the last sentence in regards to a Phase II Environmental Site Assessment.
  • Special Use Facilities (Section H), when a Phase II is required for a dry cleaners in operation for more than five years the Phase II must be conducted by an independent Environmental Professional who holds a current Professional Engineer’s or Professional Geologist’s license and has the equivalent of three years of full-time relevant experience.
  • Appendix 5: Requirements Pertaining to Gas Station Loans, Phase I’s no longer need to be conducted by an Environmental Professional who holds a current Professional Engineer’s or Professional Geologist’s license and has the equivalent of three years of full-time relevant experience.  It can now be conducted by an Environmental Professional meeting the requirements as outlined in Appendix 2: Definitions. 
  • Appendix 5: Requirements Pertaining to Gas Station Loans, Phase II’s must be conducted by an Environmental Professional who holds a current Professional Engineer’s or Professional Geologist’s license and has the equivalent of three years of full-time relevant experience.

Partner Engineering and Science has a SBA Division dedicated to assisting lenders in understanding SBA’s Environmental Requirements and providing Environmental Reports nationwide for 7a and 504 loans.  Gary Reynolds is our SBA Expert and works closely with many lenders, CDC’s, and attorneys nationwide.

Keywords

SBA Phase I Environmental Site Assessment, SOP 50 10 5 (C), SBA Environmental Policy, Phase 1 ESA