By By Amy L. Edwards
In the recent release of “Brownfields: A Comprehensive Guide to Redeveloping Contaminated Property, Third Edition,” written by Todd S. Davis and Scott A. Sherman, one chapter is devoted to the very complex topic of institutional controls. Authored by Amy L. Edwards, the article updates the particulars of this topic based on trends and developments over the past couple years.
The specter of environmental liability, whether real or perceived, has driven manufacturers, developers, and others to flee potentially contaminated urban areas, or “brownfields,” in favor of undeveloped and pristine “greenfields.” The result has been increased unemployment, declining tax bases, urban blight, and increased crime in this nation's urban areas.
In a grassroots movement that began in 1988, Minnesota first developed an alternative to the costly and inefficient federal cleanup programs that were the driving force behind the flight of businesses from contaminated urban areas. In the two decades that followed, almost every state joined this movement. This movement has resulted in new regulatory and tax mechanisms at the state and local level to increase the use and redevelopment of abandoned or underutilized commercial and industrial properties. These programs, including state voluntary cleanup programs (VCPs), privatized cleanup programs (like Massachusetts' Licensed Site Professional program), and brownfields programs, typically use risk-based corrective action (RBCA) principles to achieve a “no significant risk” or comparable cleanup level.
State voluntary cleanup programs have been particularly effective in bringing contaminated properties back into productive use because they:
• establish clear cleanup requirements;
• provide some limitations on liability;
• create financial incentives for cleanup and redevelopment through tax credits, grants, or revolving loan funds;
• streamline the governmental review process; and
• provide clear documentation of when sufficient cleanup has been conducted.
Residual contamination may be allowed to remain in place in a program using risk-based corrective action principles if the residual chemicals of concern do not present an unacceptable threat to human health or the environment. Whether there is a risk can be determined using accepted risk assessment methods. To determine whether the residual contamination would present “no significant risk” to human health and the environment based on reasonably foreseeable future uses of the site, the parties must examine:
• the chemicals of concern;
• the sources of exposure (i.e.,the location of the chemicals of concern in relation
• the pathways of exposure (air, water, soil); and
• human and ecological receptors (including, but not limited to, office workers, construction workers, residents, waterways, and endangered species).
Once assumptions have been made about the chemicals of concern, sources of exposure, pathways of exposure, likely receptors, and future land uses, those assumptions need to be “locked in” to prevent inconsistent future land uses. This can be accomplished by using institutional and engineering controls. Likewise, certain activities may need to be restricted in order to prevent activities and events that may be in conflict with the selected response action.
Again, institutional and engineering controls can be used to identify and implement any restrictions or limitations on land use.
Definition of Institutional Controls
Institutional controls are a type of activity and use limitation (AUL).AULs are “legal or physical restrictions or limitations on the use of, or access to, a site or facility to eliminate or minimize potential exposures to chemicals of concern or to prevent activities that could interfere with the effectiveness of a response action. These restrictions are designed to reduce or eliminate potential exposure to chemicals of concern, prevent activities that may interfere with a response action, and ensure maintenance of a condition of “no significant risk” to human health and the environment.
Institutional controls can take the form of easements, restrictive covenants, equitable servitudes, environmental covenants, zoning, building permits, well-drilling prohibitions, contractual agreements (such as permits and consent decrees), informational devices, or other types of controls.
Institutional controls may be either temporary or permanent in duration, as required by the conditions or attributes of the site. It may also be prudent to “stack” or “layer” institutional controls, rather than rely on a single type of control. For example, a property owner may enter into a restrictive covenant with a prospective purchaser while also filing a Declaration of Easement and Restrictive Covenant with the state under the state cleanup program.
These controls should identify site uses and activities that are consistent with maintaining a condition of “no significant risk,” as well as site uses and activities that should not occur in the future because of the potential to expose persons or ecological receptors to environmental risks. Finally, institutional controls should specify ongoing maintenance and operation obligations necessary to meet the objectives of the selected response action.
Examples of Institutional Controls
There are four basic types of institutional controls: proprietary controls, governmental controls, informational devices, and enforcement tools. Each of these controls is described in greater detail:
Proprietary controls are those tools that are available under traditional property law. Typical examples include restrictive covenants, easements, equitable servitudes, and “deed restrictions.” Private parties who intend to use a proprietary control as an institutional control need to understand state property law, including the legal formalities required to create the restriction and any limitations that may apply to the restriction in the jurisdiction where the site is located.
Real property rights are frequently described as a “bundle of sticks.” One way to create an institutional control is to convey one or more of these “sticks” to a third party. Whether that third party is a prospective purchaser, the state, the local government, an adjoining property owner, or someone else depends on a number of factors,
including whether a conveyance is anticipated and whether the state or local government is willing to be a recipient of the “stick.” The interest in the land that is conveyed is usually non-possessory in nature.
In order for proprietary controls to be enforceable, they must be created in accordance with certain legal formalities, including the following:
• The control must be in writing. The terms of the restriction must be spelled out with great specificity and recorded in the local or county land office or deed registry.
• The parties' intention must be for the restriction to be placed on the land for a clear and unambiguous period of time. The restriction must precisely reflect the parties' intentions regarding the scope and duration of the restriction and “run with the land.”
• The restriction must “touch and concern” the land. It must center on the use of the land and affect the land itself in some way. A deed restriction that limits the use of the land can be said to “touch and concern” the property.
• There must be a relationship- i.e., privity between the parties. Only persons with a certain relationship to the property can enforce a deed restriction.
One of the advantages of proprietary controls that “run with the land” is that it can be enforced by the beneficiary of the restriction without the need to establish “imminent and substantial endangerment.” For such restrictions to be enforceable, there must be a grantor, a grantee, an intent for the control to run with the land.
These restrictions can be challenged and possibly extinguished if the type of restriction is disfavored under the common law of the state where the control is imposed. To avoid some of the problems that have arisen under traditional property law doctrines, it is prudent when drafting an institutional control to specify the intent of the
control very clearly. For example, who has the right to enforce the control? Does the control run with the land? What types of uses are permitted? What types of uses are prohibited? Who will maintain the control?
The following are examples of the more common types of proprietary controls.
Restrictive covenants are a non-possessory interest in real estate. They must be created pursuant to certain legal formalities in the context of the transfer of a possessory interest in real estate from one party to another. The restrictive covenant contains the promise by one party to another to use, or to refrain from using, the property in a particular manner. For example, the prospective purchaser may agree to use the property for industrial purposes only, or it may agree to refrain from using the groundwater for any purpose other than monitoring.
The term "deed restriction" has no clear legal meaning in traditional property law. Nevertheless, several state cleanup programs use the term "deed restriction" to refer to easements. An easement is a property right that is conveyed by a landowner to another party, giving the second party either access to the property or prohibiting certain uses of the property. An easement may be either affirmative or negative in nature.
Easements may also be "appurtenant" or "in gross." Appurtenant easements are those that are created to benefit an adjoining property. An easement "in gross" is one that is not related to any property that the holder of the easement may own. For example, if the state were the holder of the easement, this would likely be an easement in gross. In the past, both negative easements and easements in gross were disfavored under the common law, thereby limiting their usefulness as institutional controls. However, these impediments are beginning to disappear as many states have amended their laws+ Where clear statutory authority exists, easements are being used more frequently by both federal and state environmental authorities as institutional controls in their cleanup programs.
An equitable servitude is similar to a restrictive covenant but may not meet all of the legal formalities for creating a restrictive covenant. Equitable servitudes are typically recognized when a party is seeking equitable relief rather than money damages. An equitable servitude may run with the land if the subsequent landowner has had notice of the restriction, the restriction touches and concerns the land, and the owner's intent to bind future landowners is clear.
Requiring private parties to restrict land uses by contract is another type of institutional control. In this situation, however, the obligations are only incurred by the parties to the contract. The state may not intervene in the bargain or attempt to enforce the provisions of the agreement. In addition, the state probably will not be able to assert any control over or attempt to institutionalize the process or scope of the agreement. Any attempts to do so would be considered interference with the private parties' right to freely negotiate liabilities and restrictions among themselves.
While this type of control may be useful in settling immediate issues between two parties, it is not effective as a long-term solution. Alternatively, however, the state may enter into a contract with a party to require long-term monitoring, use restrictions, or financial assurances for the long-term funding of corrective action.
State and Local Government Controls/State Statutory Institutional Controls
Because of the difficulties in implementing and enforcing proprietary controls under traditional property law, and prior to enactment of the Uniform Environmental Covenants Act (UECA) (discussed further in the following section), several states enacted legislation to overcome some of these common law barriers.
For example, Massachusetts established both a Grant of Environmental Restriction and a Notice of Activity and Use Limitation. Connecticut adopted a Declaration of Environmental Land Use Restriction and Grant of Easement. Arizona promulgated a Declaration of Environmental Use Restrictions (DEUR). These states have overcome by statute some of the common law limitations discussed earlier.
Statutory restrictions are used by many states in their model codes to ensure that such restrictions are binding against landowners and successors in interest. In the context of state voluntary cleanup programs, restrictions are often created between the property owner and the state. In the better state programs, the restriction will state that the appropriate state agency may enforce the restriction."
The restriction should also be recorded or registered in the appropriate land records and with appropriate authorities to provide future landowners with notice. If a statutory restriction is violated, its terms may be enforced in several ways. In some states, an affected person or agency may go to court to obtain an injunction
to enforce the terms of the restriction, or, if the state statute allows for it, the state attorney general may seek civil penalties. In addition, any liability protections offered under the state voluntary cleanup program may be voided and the property owner may be required to conduct additional remediation to achieve an "unrestricted use" standard.