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April 2008 Archives

New York Brownfields Law Update: Denial of eligibility decisions mostly upheld

In 2003, the New York Legislature passed the Brownfield Cleanup Program, ECL § 27-1401 et seq. The benefits of the Brownfield Cleanup Program ("BCP") are many: the developer receives a liability release from the State following DEC oversight during the cleanup of the property. The most coveted benefit, however, is a tax credit of up to 22% based not merely on the cost of cleanup but also on the cost to redevelop the site. A few New York City developers have reaped enormous rewards on $100+ million developments.

Borrower's Covenants

Post-closing covenants will be required for a borrower in a loan transaction, or a tenant in a lease transaction.
1. Borrower will be required to comply [in all material respects] with Environmental Requirements, to notify lender promptly in writing after knowledge in the event of any release which violates any applicable Environmental Requirement, of any Adverse Environmental Condition

Maintain Reps

In a sale or loan transaction the most important pre-closing covenant is that the borrower or seller will maintain the property in compliance with all environmental laws and will re-affirm accuracy of the representations and warranties as of the closing date.

"As Is" Clauses

Seldom is a knowledgeable buyer with experienced counsel willing to accept property "as is." Nonetheless, if that is the agreed term of the transaction, then special care must be taken to make that provision effective. It will be construed against the seller.

No Asbestos, PCBs, USTs

It may be appropriate to add specific representations on individual contaminants or areas of concern to buyer or lender. In addition to those listed, formaldehyde and radon may be of concern to the buyer.

No Notices or Knowledge of Basis

1. Disclosure of outstanding notices or basis for notices is important to a continuing business: "Seller has not received written or oral notification that any of its current or past operations or a by-product thereof is related to or subject to any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a release or a threatened release of a contaminant. 

No Hazardous Substances

This most common of representations and warranties is most often abused. Buyer or tender may initially want a flat representation that there are not now and never have been any Hazardous Materials on the premises or any operations that generate, use, treat, store, or dispose of Hazardous Materials. Difficulties that immediately arise include the length of time this representation will reach back, the de minimis without a qualifier based on the best knowledge. 

All Required Permits

Although the possession of and compliance with all necessary permits is important information for a buyer expecting to continue a business or a lender depending on the viability of a business, representations regarding permits do not necessarily cover potential liabilities for remediation or third party damages.

No Violations / Compliance With Laws

A typical provision states: "Except as set forth in schedule x.x and except for violations which would not have a Material Adverse Effect, seller is not and has not been in violation of any Environmental Requirements. 

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