Environmental pedigree before business property sold

Beginning January 1 selling certain industrial properties will be a little more complicated in Illinois. It will still be easier than in New Jersey, however, because businesses drafted, pushed and passed the Responsible Property Transfer Act of 1988 (P. A. 85-1228) and thereby preempted adoption of a New Jersey-type law. The new Illinois law will alert buyer, seller and lender to potential environmental problems with property. It will not require, as the New Jersey law [does, that property be cleaned up before sale or lease. Still environmentalists are calling it progress, although one called it a "baby step."

The new law evolved from a two-year effort by the Illinois Environmental Regulatory Group (IERG), the Illinois State Chamber of Commerce arm that represents Illinois' 35 largest companies. The group conducted a study with an eye on New Jersey, where a 1983 law requires that sites be clean of environmental hazards before they can be sold or leased.

On April 10, 1987, an Illinois version of the New Jersey law was introduced in the General Assembly. S.B. 1244 cleared the Senate but was held in the House while the business group finished work on its proposal. Sidney M. Marder, executive director of IERG, believes that the 1987 bill was not close to passage. But had his group not offered its alternative, Marder says, that bill or one like it would have been the starting point for this year's negotiations.

Faced with that prospect, the group first hammered out the necessary internal compromises. Some industries, Marder says, wanted to include sale of homes in the legislation on the "misery loves company" theory. Others were initially unconcerned. Realtors, he notes, became enthusiastic supporters only after attending a national conference in New Jersey and talking to their friends there. Eventually IERG enjoyed the formidable support of realtors, insurance companies, engineers, bankers and lawyers.

In February the state chamber launched its campaign for a bill that business could live with. They released the study done by Marder's group and criticized the New Jersey law and the 1987 bill sitting on the interim study calendar. The chamber charged that S.B. 1244 could cost $100,000 for even small cleanups, delay property transfers for a year or more, and discriminate against reuse of industrial property. "Responsible land transfer is more than just an issue between environmentalists and industry. This is a far-reaching economic issue affecting the state's business climate and jobs," Lester W. Brann Jr., president of the state chamber, charged.

On March 30 the act was introduced as H.B. 3462 under the sponsorship of House Majority Leader Jim McPike (D-112, Alton). Negotiations ensued, and the bill was passed by both houses with virtually no debate. Marder attributes the ease of passage to the work done by IERG in the previous year and a half.

As signed the new law:

• Applies to property containing underground tanks registered with the state fire marshal or facilities that must report under the federal Emergency Response and Community Right-to-Know Act of 1986.
• Requires that, in transfers of such property, the seller or lessor provide the buyer or lessee and any lender with an environmental disclosure statement before the date of transfer.
• Requires the disclosure statement to state that both transferor and transferee may be liable for cleanup costs whether or not either caused the environmental problem. The disclosure statement goes on to include a history of what the property has been used for, including whether or not hazardous substances have been involved.
• Allows any party to void an agreement if the disclosure reveals previously unknown environmental defects.
• Requires that, within 30 days of closing the sale, the disclosure document must be filed with the county recorder of deeds and with the Illinois Environmental Protection Agency.

Marder says that the disclosure statement "elevates the knowledge base" of all parties to a transfer by alerting the buyer to potential problems. He thinks it will work because buyers and buyers' lenders are alerted, in straightforward English, to liability and then given a history of the property. "Maybe the seller may want to hide it, but the buyer and the lender are going to [read the disclosure statement and] say 'I don't want to do this. I'm going to check it out,' " he says. "So we feel this is more than adequate and it will do the same thing as Jersey, without the delay."

By alerting the buyer that he may be buying into a liability, the law could be regarded as a free market approach to the problem, Marder says. Such a tack is feasible only because laws already on the books lay the responsibility on those who own the property or created the problem, he adds.

The environmental community characterizes the bill as a first step but wants to see what happens with it. Kevin Greene, lobbyist for Citizens for a Better Environment, says it was clear that a New Jersey type bill was not going to clear the General Assembly, so his allies worked instead to improve the chamber's effort. Their changes included a more complete disclosure form and a requirement that it be filed with both the county and with the Illinois Environmental Protection Agency.

Greene says that environmentalists would prefer a guarantee that the site be cleaned up, as must happen in New Jersey. They would like to see state approval of cleanup plans and are most worried about sales of properties held by small- and medium-sized companies. But Greene says it is not a bad bill. "It's a good first step. We may have to revisit this subject in the future."

Marder hopes that only technical changes will.be necessary. "Let's see how it works," he says. "I think that the motivation of fear and greed on behalf of the buyers and the lenders is going to be enough to get this done."□

December 1988 | Illinois Issues | 25