• In the transaction for the sale or purchase of a hotel, both the seller and buyer will usually have divergent due diligence concerns.  The buyer typically wants full disclosure and broad representations and […]

  • Start            End              Conference                              Location

    ICBA National Convention
    Orlando, FL

    CLRM Roundtable
    Phoenix, AZ

    CREJ: Multifamily Owners and […]

  • The use of polychlorinated biphenyls (PCBs) was widespread before 1977, and the health risks associated with PCBs are well known. PCBs have been widely studied, analyzed, regulated, and managed since the Toxic Substances Control Act (TSCA) was passed in 1976. Over the nearly four decades since 1977, PCBs have been found in a wide variety of building products, including sidewalk caulk, window glazing, expansion joints, crack sealants, caulks used as gaskets, surface coatings (e.g. paint), and caulks used between masonry blocks, among other uses. Much of this material still remains in excellent condition, and largely as it was the day that it was installed. This remarkable durability of PCB caulks is a testament to the physical and chemical properties of PCBs!

    EPA has studied PCBs in caulk (including surface coatings), investigated PCB caulk in school buildings, and developed regulations and guidelines for PCBs in caulk when discovered. However, EPA does not require commercial landowners, States, or municipalities to test for the presence of PCBs in caulk. PCBs are only regulated in caulk and building materials contaminated by caulk when discovered. In some instances, municipalities, private lenders, and public lending agencies require testing for PCBs in caulk. However, there still remains no Federal requirement to do so.

    PCBs in caulk are a problem from both public health and landowner perspectives. From a public health perspective, the health risks of PCBs themselves are well known, and the presence of PCBs in caulk have been found to create significant human and ecological exposures. However, the risk of PCBs in caulk in the built environment has not been fully quantified. In addition, the scope of the problem -the amount of affected caulk that is out there – is entirely unknown.

    What This Means To The CRE Industry

    For a commercial landowner or prospective purchaser…“when discovered”…presents a problem. Should PCBs in caulk (>50 ppm PCBs) be discovered, the caulk is not an approved use under TSCA, and the caulk has to be removed as a PCB bulk product waste (40 CFR Part 761.62). Porous surfaces such as masonry that are contaminated  may continue to remain in use for the useful life of the material as long as encapsulated using the methods required under 40 CFR Part 761.61. Such a task is neither simple nor inexpensive, and can require a small army of environmental consultants, attorneys, and contractors to complete. When purchasing an older commercial building, the purchaser has a voluntary decision to make during due diligence: to perform a PCB Caulk Assessment or not (health concerns aside).

    Since there is no obligation to test for PCB caulks (other than to provide a safe environment for building occupants), the purchaser or landowner may never have to identify, manage or dispose of PCB caulk and affected porous surfaces. As a result, its presence could result in no financial exposure if never discovered.

    On the other hand, if PCBs are discovered after closing or during demolition/reconstruction, PCB caulk could create a significant regulatory requirement to remove the caulk and manage affected materials in the middle of a demolition or renovation project. Even worse, PCBs could be discovered after a renovation has been completed, necessitating remediation of a newly finished space.  Such scenarios have far reaching implications. Discovering caulk “after the fact” can have dire consequences. The potential for an unexpected cost exposure can have a big impact on budgets, schedules, and asset values. The not insignificant cost of dealing with PCB caulk can disrupt financing, and wreak all manner of havoc with respect to third party liability, insurance, building occupants, and regulatory compliance.

    Even if not discovered during ownership, a new prospective purchaser may perform a PCB Caulk Assessment during future due diligence, develop a remediation estimate, and demand a purchase price reduction to pay for the cost of its management and disposal. If the deal falls apart, the presence of PCB caulk is then a known condition that needs to be disclosed to the next buyer, potentially devaluing the asset. In addition, a known condition may not be insurable.

    The issue of PCBs in caulk will not go away. The problem is that these caulking materials could be anywhere in the United States, they slowly dust and off-gas into the indoor environment, leach over time to adjacent masonry, other surfaces, and even to soil, sediment, and storm water. PCBs from caulk have also been found at significant concentrations in indoor air. If PCBs that have leached from caulk are found in soil, the soil should then be regulated as a PCB remediation waste (40 CFR Part 761.61).

    At the present time, the EPA has not adopted an approach to require testing PCBs in caulk. Even if a requirement to test caulk for PCBs emerged, the regulators don’t have the resources or personnel to manage the large volume of work plans, reviews, and approvals necessary to manage the issue. Since TSCA is a Federal regulation, states and municipalities don’t have the authority to make decisions for the EPA. Such a regulatory log jam on the Federal level is unthinkable.

    The decision to test or not test for PCBs in caulk belongs to the purchaser during due diligence. The risks of not testing include 1) buying a building with a hidden health hazard, and 2) buying a building with a hidden financial liability…often a big liability. The risk of testing includes incurring a significant expense now that may never otherwise come to fruition because PCBs may never be identified. Given that this caulk is not painted bright red to signify its presence, it represents an invisible potential health hazard and financial liability.

    For the EPA, the issue of PCBs in caulk is the classic hot potato: the scope of the problem is unknown, may be vast, and there may not be a cost effective and logistical way to deal with what may or may not be a significant public health issue. PCBs in caulk are an emerging issue. Should you chose to avoid it, the likelihood that PCBs will be discovered at some point by a contractor, employee, or other party is ever increasing. So, you are on your own. Given this framework, you can seek opinions, but the decision is yours to make.

  • In his recent white paper, Abe G. Salen of The Wolf Firm, discusses who a full time employee is under the Affordable Care Act.

    Read the full article: The Affordable Care Act – Effect on Seasonal Employees

  • An ALTA Land Title Survey can be thought of as a pictorial representation of the title commitment or preliminary title report of the subject property. In essence, it’s a combination of a boundary survey, location […]

  • Kelly McMicken changed their profile picture 2 years, 2 months ago

  • After a number of delays, full compliance with AB 1103, California’s commercial building energy disclosure law, will be required starting September 1, 2013.
    AB 1103 requires commercial building owners to disclose […]

  • !–more–

    Partner Engineering and Science, Inc. (Partner) hosted a webinar yesterday about Phase II Environmental Site Assessments (ESAs) titled “a User’s Guide to Phase II Subsurface Investigations”.

    It was […]

  • California’s Green Building Standards, better known as CALGreen, is currently being updated to further advance green building practices. The updated code goes into effect on January 1, 2014. All project […]

  • Kelly McMicken changed their profile picture 2 years, 5 months ago

  • Seismic Risk Assessments are an assessment that can be “forgotten” when the lender/buyer is not themselves in a seismic risk zone. Property that is in a high risk seismic zone should be evaluated for loss during […]

  • Partner’s Technical Director – Structural Engineering, Joshua Marrow, PE and Principal, Jenny Redlin, REA presented an informative webinar today regarding the Essentials of Seismic Risk Assessments. This hour long […]

  • Partner Engineering and Science, Inc. is pleased to launch our spring webinar series. This series offers new and updated webinars that discuss commercial real estate trends, standards updates and changes as they […]

  • Partner Engineering and Science, Inc. is pleased to launch our spring webinar series. This series offers new and updated webinars that discuss commercial real estate trends, standards updates and changes as they […]

  • Kelly McMicken changed their profile picture 2 years, 7 months ago

  • Engineering due diligence is an important part of the property transaction process. Like environmental due diligence, there are a variety of engineering due diligence products to assist in evaluating an asset. […]

  • During the acquisition, refinance or foreclosure of a property, it is important to understand the asset’s potential environmental liability in order to protect your investment and to weigh the risks associate with […]

  • Commercial Real Estate Due Diligence

    Underwriters, analysts, and loan officers who want to deepen their knowledge of Commercial Real Estate Due Diligence are well served to learn a little about each type of […]

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