Commercial real estate community says ‘Transfer Act’ stifling economic development in CT

At a May 2 commercial real estate conference held at the Delamar Hotel in West Hartford, realty brokers and developers lamented a number of Connecticut policies and regulations they say hinder economic growth. One that aroused the most frustration was the so-called “Property Transfer Act,” which was adopted in 1985 to encourage the cleanup of polluted properties. The law is pretty technical but it generally requires the disclosure of environmental conditions and, if not previously done, investigation and remediation of hazardous waste generated on certain properties before they can be sold. It particularly singles out real estate operated by dry cleaning, furniture stripping, or auto-repair businesses. However, realty brokers and others say the law is too broad and can ensnarl deals involving properties that pose little or no environmental risks, delaying transactions, hamstringing economic development — including the potential rebirth of derelict buildings — and making outside investors skittish about buying properties in Connecticut. The real estate community has long had a beef with the law, but is making a more concerted push this year to lobby for reforms, hoping to get support from the Lamont administration, which has talked about creating a friendlier business environment. Department of Economic and Community Development Commissioner David Lehman has already said he is examining whether middle ground can be found to improve “the speed at which properties change hands.” A bill in the legislature that would tweak the Transfer Act has passed out of the Commerce Committee, but advocates say they are pushing for much broader reforms. Two other bills in the legislature proposed to entirely repeal the Transfer Act, but they didn’t gain traction. Connecticut is one of only two states that has a Transfer Act policy. The other is New Jersey. “The Transfer Act has been a very difficult law to live with,” said commercial realty broker Mark Duclos, who is president of Sentry Commercial in Hartford. “It’s an environmental law that has restricted economic growth in the state.” Duclos was a speaker at the recent 2019 Connecticut commercial real estate conference, where he encouraged fellow brokers and others to join the push for reforming the law. He said his firm is working on two deals right now that likely will not move forward due to the increased costs of environmental investigation and compliance with the Transfer Act. Commercial broker Frank Hird, vice president of O,R&L Commercial, has been a leading voice on the issue and he too says he’s dealt with many prospective property buyers who have shied away from deals because of the Transfer Act. The Connecticut Economic Resource Center published a study in March that concluded the potential impacts of the act are widespread, with over 470 filings under the law in the last five years. CERC also said it found dozens of property sales that were either delayed or halted as a result of the Transfer Act, costing Connecticut at least 7,000 direct jobs and $178 million in tax revenues. Push for more exemptions The Transfer Act program is administered within the state Department of Energy & Environmental Protection, but properties or businesses subject to it must hire an outside environmental expert to oversee inspections and any required remediation. That expert must also file a report with his or her findings to DEEP, which currently has up to three years to verify that the property is in compliance with the law. A bill in the legislature — Senate Bill 1030 — aims to shorten that so-called audit period to 60 days. The real estate community supports shortening the audit period, but says that alone won’t do enough to make meaningful reforms. Pamela K. Elkow, an environmental lawyer from Carmody Torrance Sandak & Hennessey LLP in Stamford, said the overriding issue is that a lot of properties that don’t have a history of environmental issues get dragged into the act, which can lead to a costly regulatory process. A property inspection alone, including investigation of soil and groundwater to prove that no spill has happened, can cost about $100,000, she said. Elkow is part of the coalition pushing to exempt more properties from the act. For example, currently any property that has generated more than 100 kilograms — or 220 pounds — of hazardous waste in any one month since Nov. 19, 1980, is subject to the Transfer Act. However, hazardous waste has a broad meaning and the act can apply to a company or property that had a one-time incident, or experienced an activity not associated with their actual business. Pamela K. Elkow, Partner, Carmody Torrance Sandak & Hennessey LLP Elkow gave as an example a former day-care center property, which contained leftover cans of paint that had nothing to do with the operation of the actual business. That paint, however, still qualified as a hazardous waste, opening up the entire property to a prolonged and costly inspection. She supports an exemption to the law for properties that have generated limited hazard waste unrelated to the products made or services provided at the site. Another problem, Elkow says, is that an entire property may be subject to the Transfer Act even if only one section of it was used by a company that generated hazardous waste. For example, if a 30,000-square-foot strip center includes a 5,000-square-foot dry cleaner business, it would subject the entire property to the Transfer Act. Elkow and others want to limit the scope of the law to just the section of the property where the activities covered by the Act occurred. “The Transfer Act as it currently is, is an impediment to growth in Connecticut,” Elkow said. In a statement, Department of Energy and Environmental Protection Commissioner Katie Dykes said her agency shares “the goal of modernizing the Transfer Act to ensure that it focuses on investigation and cleanup of those properties that pose the highest risk to human health and the environment, while not entangling low-risk properties. DEEP is pleased to be working with the legislature to move ahead certain immediate changes to the Act that will help speed up the process and exempt one-time generation of hazardous waste from triggering the Act.” She added: “DEEP is also strongly committed to working with stakeholders to evaluate additional opportunities to improve the framework for remediating contaminated properties.”