The Connecticut Transfer Act, also known as the Connecticut Property Transfer Program, governs the transfer of hazardous waste sites in the State of Connecticut. The Transfer Act can be found in the Connecticut General Statutes (CGS) beginning at Section 22a-134. The Transfer Act is administered by the Connecticut Department of Energy and Environmental Protection (DEEP) and additional information can be found at the DEEP’s website, www.ct.gov/dep.
The scope of the Transfer Act is very broad and can potentially affect any commercial property (and even some residential properties). The penalties for not complying with the Transfer Act are severe. A seller which does not comply can be subject to significant fines and strict liability for any contamination on the property. It is critical that each property and transaction be carefully reviewed to determine whether compliance with the Transfer Act is required. If you have any questions about compliance with the Transfer Act, you should definitely consult with an experienced environmental attorney and an environmental consultant.
The Transfer Act is intended to serve two goals: disclosure and clean up. The Act forces sellers of property and businesses to disclose to the buyer the current environmental condition of the property. In addition, if the property is contaminated, the seller (or another party) must agree to clean up the contamination in accordance with the requirements of the DEEP.
The Transfer Act applies to both real estate and businesses which meet the definition of an establishment, or as outlined in the Transfer Act, “any real property at which or any business operation from which (A) on or after November 19, 1980, there was generated, except as the result of remediation of polluted soil, groundwater or sediment, more than one hundred kilograms of hazardous waste in any one month, (B) hazardous waste generated at a different location was recycled, reclaimed, reused, stored, handled, treated, transported or disposed of, (C) the process of dry cleaning was conducted on or after May 1, 1967, (D) furniture stripping was conducted on or after May 1, 1967, or (E) a vehicle body repair facility was located on or after May 1, 1967.” (CGS Section 22a-134(3)). The Transfer Act applies to both real estate and businesses. Therefore, if someone is buying a business which constitutes an establishment, but is not buying the real estate, compliance with the Transfer Act is still required.
The first issue that you must resolve is whether the property or business is an establishment. Sometimes this will be very easy to determine. In other situations it will be much harder. For example, if the business has a small or large quantity hazardous waste generator’s permit, then the property automatically meets the definition of an establishment. On the other hand, if the property or business does not currently meet the definition of an establishment, the inquiry does not end there. All of the uses of the property going back to 1980 (and in some cases, 1967) must be investigated. It may be possible to do this without a formal environmental assessment, but the best way to complete this investigation is through the completion of a Phase I Environmental Site Assessment by a qualified environmental professional. The Phase I report must meet certain requirements which can be found on the DEEP website. The Phase I report is a preliminary investigation intended to determine whether environmental contamination may exist on the site. It also contains an exhaustive review of the history of the site, including past uses. Through this review a determination can usually be made as to whether a property constitutes an establishment.
Once you have determined that a property or business meets the definition of an establishment, you must also analyze the type of transfer involved. Although an outright transfer of a business or real estate would always require compliance with the Transfer Act, there are numerous transfers which are exempt. Some important exemptions include mortgages, some foreclosures and deeds in lieu of foreclosure, some leases, and easements. The exemptions must be reviewed carefully to determine whether compliance with the Transfer Act is required. The complete list of exemptions can be found at CGS 22a-134(1). Note that the statute is written in the negative—it tells you the transfers that are not transfers of an establishment. Any other type of transfer would be a transfer of an establishment.
After you have determined that compliance with the Transfer Act is required, then the real work begins. You must then determine whether there has been any release of any hazardous substances at the property. In order to determine this you must do a Phase I and often Phase II site assessments. A Phase II site assessment can take many forms, but typically involves taking samples of the soil and groundwater to look for potential contamination. If there has been no release, then a Form I can be filed. A Form I is a certification by the seller of the property or business that there has been no release of a hazardous substance at the property. The Form I must also include an Environmental Condition Assessment Form (ECAF), which is a detailed summary of the environmental condition of the property. This must be completed by a Licensed Environmental Professional (LEP), an environmental consultant who has met certain standards established by DEEP. A seller must be absolutely certain that there has been no release of a hazardous substance. Even if there is a minimal amount of contamination, such as surface staining from an oil change, the DEEP will not permit the filing of a Form I. Once a Form I is filed, the seller’s obligations are completed, unless the DEP rejects the form. These rejections are occurring on a more frequent basis. The fee for filing a Form I is currently $300. Of course, this does not include the cost of environmental consulting fees.
If there is evidence that there has been a release of a hazardous substance at the property, then a Form I cannot be filed. Instead, a Form II, III or IV must be filed. A detailed description of the three forms is beyond the scope of this digest, but all involve a certification by the seller (or another party) that it will fully investigate the current environmental condition of the property and remediate any contamination. This is, as it sounds, a very open-ended commitment. The seller’s (or other party’s) obligations are not complete until the property is remediated to the standards required by DEP. Note, however, that the certifying party does not have to be the seller. Instead, it can be the buyer or another party, such as a former owner who may have already signed and filed a form. The fee for these forms is based upon the cost of the clean up.
Once the forms and fee payment are submitted, DEEP will review them and respond as to whether the forms are complete. Once the forms are complete DEEP will make an important determination. DEP has the right to decide whether the clean up has to be supervised by DEEP or whether it can be supervised by a licensed environmental professional. The clean up process will go much faster and generally cheaper if it can be supervised by a LEP. The property owner generally has no control over this process. Nonetheless, as long as the property is not located in an environmentally sensitive location, it is likely that DEP will permit the LEP to supervise the clean up.
The clean up has to be completed in accordance with standards which have been created by DEEP. These are referred to as the “remediation standards” and they apply to both soil and groundwater. Previously there were no standards and the process was more arbitrary. Once the clean up is complete the LEP will submit a final report to DEEP confirming that the remediation has been completed in accordance with the remediation standards. Then you have to wait for a final approval or “no action letter” from DEEP. Receipt of this letter confirms that no further remediation is necessary. It is also important because it may exempt the property from compliance with the Transfer Act in the future.
Under the original version of the Transfer Act, once a property came under the Transfer Act the seller would be required to comply for all subsequent transfers, even if the current use of the property would not constitute an establishment. Since the original adoption of the Act, however, there have been some very important changes. If a Form I or Form II has been filed for the property and since the date of filing the form the property has not been an establishment, then it is no longer necessary to comply with the Transfer Act. In addition, if a Form III or Form IV has been filed, the property has been fully remediated, and confirmed by DEEP or a LEP, and since the date of filing the form the property has not been an establishment, then it is also no longer necessary to comply with the Transfer Act.
Negotiating the Connecticut Transfer Act is a very complex process. The Transfer Act can apply to any property, not just large industrial sites. It is critical that the property owner engage the services of a qualified attorney and a licensed environmental professional.