Revitalization-Ready Guide - Chapter 6: Reuse Implementation

Property Sale/Lease Agreement | Transactional Due Diligence

Implementation of a reuse plan will vary based on the property or properties involved, the environmental condition of the property and many other factors that are unique to a particular transaction. Below are several key issues that can be important to the successful implementation of the reuse.

Property Sale/Lease Agreement

The property transaction will involve a contractual agreement to define the terms of the transaction and the responsibilities of the buyer and seller with respect to the environmental condition of the property. This typically will involve outlining the responsibilities of both parties with respect to cleanup and long-term operation, maintenance and monitoring, as well as providing indemnities and financial assurance mechanisms.

Environmental Responsibility

The property sale/lease agreement should clearly define the parties responsible for conducting remaining investigation and cleanup activities, as well as responsibility for long-term operation, monitoring and maintenance of ongoing remedial action, and institutional and engineering controls. The agreement should describe the responsibilities for performance of environmental activities, including financial responsibility and regulatory compliance; provide indemnities related to the retained or assumed environmental responsibilities, procurement of pollution legal liability (PLL) insurance or other financial mechanism; and address other risk and liability transfer issues.

Integrating Cleanup with Redevelopment

Coupling redevelopment with cleanup activities can ensure cost-effective site cleanup and address potential environmental risk. Brownfields real estate transactions provide an opportunity to integrate environmental cleanup with sustainable reuse of a property. The design and implementation of the reuse of the property can incorporate potential cleanup activities, as well as long-term operation, maintenance and monitoring related to the environmental condition of the property. Reuse planning can incorporate siting of cleanup equipment, monitoring wells and buildings to avoid conflicts with the development.

Engineering and Institutional Controls

Many brownfield properties incorporate in their remedial plans controls that restrict property access or use. The presence of existing or proposed engineering and/or institutional controls should be identified in the transaction. Typically, engineering controls such as asphalt caps and fencing require periodic inspections and repairs as necessary to ensure they remain protective of human health and the environment. Institutional controls such as land use restrictions often take the form of deed restrictions or easements. Property owners must be aware of these restrictions and ensure they transfer to the new owner if the property is sold.

Transactional Due Diligence

When implementing a reuse project, there are many items to be aware of in order to complete a transaction and make the project a reality. Below is a list of information that may be needed prior to closing on a transaction.

All Appropriate Inquiries

As discussed in Chapter 3[AP2], the Phase 1 ESA is an environmental due diligence report prepared for real estate transactions such as land purchases and building purchases. If a property is impacted by an environmental condition on the property or on adjacent properties, in order to meet the AAI requirements and qualify for certain protections from liability under CERCLA, ensure that the one-year-and-180-days prior to acquisition update requirements for all appropriate inquiries are met (see the Due Diligence [AP3]section in Chapter 3).

Geotechnical Study (Soil Study)

The goal of a geotechnical investigation is to obtain information on the physical properties of the soil to support development on the property. In the case of a geotechnical investigation for a development project, the following are important areas of examination:

Footprint of the building.
Land area on which the building will be located.
Land slope.
Land closeness to water (lake, stream, river).
Geographical location where the building will be located.

Property Survey

A property survey is a legal document that shows the location of all improvements relative to a commercial property's boundaries. For property transactions, an American Land Title Association (ALTA) survey provides a detailed land parcel map, showing all existing improvements of the property, utilities and significant features of the property. It identifies easements and exceptions cited within an insurance title commitment document. The ALTA survey is a combination of a boundary survey, title survey and a location survey, and generally contains an illustration of the physical features of the property and a written report detailing the surveyor's opinions and concerns.

Local Government Review and Approval

Once the initial plans have been developed and the purchase contract signed, it is time for the implementation process to occur. This next phase focuses on critical signoffs and approvals required for the proposed reuse development to come to life.

In order for projects to become realities, they must first get the approval of the appropriate local government and other government entities. These local government processes should be reviewed to ensure they are appropriate, required and adequate for optimal development. If possible, local governments can listen and work with the development community to better understand their needs in order to design the most efficient process for both parties. Submittal and review often entail several processes.

Zoning Review

Zoning review is meant to ensure the compliance with standards and provisions set by each local government, while encouraging quality development. It is intended to encourage the most appropriate use of the land, enhance aesthetic value, and facilitate adequate provision of transportation, schools, parks, and other public requirements.

Site Plan Review

A detailed site plan is submitted, along with associated documents to particular government departments, agencies, utility companies and others, for review and initial comments. The purpose of the review is to address how the particular development is designed and to address any issues related to public safety, water supply, sewage disposal, utilities, traffic, emergency access, public obstructions, and a variety of other elements.

Design Review

A design review provides architectural building elevations, landscape plans and drawings related to design principles and aesthetic requirements. Once the site plan and design are approved during the design review process, a developer will generally be allowed to submit construction drawings for review by the local government building department.

Entitlement Process

As part of implementation, a development must be granted permission from local regulatory agencies and the community. From a developer’s perspective, it is crucial to be prepared for this stage of the implementation process, as there will be many questions from local government planners, local residents and government leaders. From a local government perspective, it is important that these processes are streamlined to ensure the process is as efficient as possible. Examples of entitlement can be:

Rezoning.
Zoning variances.
Use permits.
Utility approvals.
Road approvals.
Landscaping.

City Council or Local Planning Commission Approval

Reuse developments must often first receive approval from the city council, local government planning commission or some other local government body. Working with and gaining approval from the government’s planning department generally allows for a planning commission or city council to approve the project at a formal public hearing. However, not all projects need the official approval of a city council or planning commission.

Public Hearing

In addition, a public hearing may be required for local property owners and residents, in order to hear feedback on the proposed reuse development. Any individual or community group, including a neighborhood council, may speak on the proposed project.

As the project works its way through the entitlement and local approval processes, a developer will begin to get a much better sense of what cost and timing are required to construct the project successfully. Local government efficiency during this process is critical to further reduce risk and alleviate any unnecessary concerns that may arise.

Building Plan Submittal and Approval

Once a project receives approval from the local planning commission or city council, it moves into construction drawing/building plan submittal with the building department.

The local government will then review the plan for compliance with the approved preliminary site plan, project conditions of approval, the required building plan checklist, and all applicable codes and ordinances. A planner will review the site plan for final approval.

Once plans have been reviewed during the usual rounds of the review process and determined to be in compliance with the local government codes, building permits are then issued. These permits give the developer authority to start construction work. While the approval requirements are necessary, it is important for the local government to facilitate the most efficient process as possible to remain transparent and effectively guide the development community through implementation.