Take steps to minimize air-quality risks that could wreak havoc on financing a property

Derek Ezovski, managing director, property due diligence group, Environmental Data Resources

As published in Scotsman Guide's Commercial Edition, July 2007.

Vapor intrusion is an indoor-air-quality issue that develops when rapidly evaporating, volatile chemicals from polluted soil and groundwater affect the air in buildings.

Not only can vapor intrusion impact human health, but it can also create risks in financing commercial buildings -- negatively impacting property values, creating liability for property-owners and leading to fearful building occupants.

Property purchasers and lenders should face the pressing vapor-intrusion problem head on. One way to do so is through the environmental site assessment.

Impact and history

Vapor intrusion has a wide range of potential health implications. Symptoms from exposure can include eye irritation, respiratory problems, headaches and nausea. Long-term exposure can raise a person's chances of developing cancer, although the effects vary based on the individual exposed, the chemical involved and the dose and length of exposure.

Volatile chemicals evaporate rapidly into the air at room temperature and normal atmospheric pressure, readily producing vapors. Many volatile organic chemicals are hazardous air pollutants.

Vapor intrusion was an issue that went largely unrecognized until the 1990s. At that time, Massachusetts was the first state to act against contaminated groundwater that not only threatened drinking water but also could migrate into indoor air.

Today, federal and state regulators are noticing. In some states, officials have reopened properties that were previously considered "closed." Regulators in New York are assessing hundreds of presumed-contaminant-free sites that have received No Further Action letters. The state's Department of Environmental Conservation concluded that out of 750 closed properties, 430 had been impacted with volatile organic chemicals and might warrant further assessment.

Stakeholder liability

Vapor intrusion can impact every stakeholder in a property transaction. Particularly, site-owners and investors can find themselves stuck with a property with a problem that wasn't discovered before purchase. This can lead to liability, property-value losses and stigma damages, or damages to a property's value from perceived or real environmental risk.

Lenders, too, can feel the impact. Because the property in a transaction is often used as collateral, it is problematic if the site's value is reduced or if the borrower's ability to pay back the loan is affected.

Today, vapor intrusion complicates more real estate deals and could be more widespread than has been reported. The chemicals that lead to vapor intrusion are often from hidden sources of contamination underground. They can enter the environment some distance from the target property. In other words, the problem isn't always contained to a small or obvious area.

Concern about vapor intrusion is growing. The U.S. General Accounting Office estimated in 2002 that as many as 200,000 underground storage tanks in operation were not maintained properly, which could increase the chance of a spill or leak. Further, according to the Coalition for the

Remediation of Drycleaners, more than 75 percent of the estimated 36,000 active dry cleaners in the United States are contaminated with volatile chemical solvents.

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