What is a Brownfield? Defining the Brownfield ABCs.
What is a brownfield? Is there one definition or many? How will the brownfield question define my legal liability when I purchase real estate?
Brownfield definitions can and do vary by state, but Congress and the Small Business Liability Relief and Brownfields Revitalization Act of 2002 defined the term "brownfield" as "real properties, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant."
So, brownfields can be a state of mind. If someone thinks a property might be complicated by a contaminant, then it can become a brownfield. Often this subjective opinion drives the market reality in the form of discounted prices or perceived development infeasibility. To a risk advisor, a property is a brownfield until proven otherwise—better to presume the worst and work backwards.
But presuming the worst isn’t just prudent risk practice, it’s also built into U.S. law. The presence of hazardous substance on a brownfield should be determined by a professional investigation known as an environmental site assessment (ESA), because the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 makes the purchaser of any real property liable for any contaminants on the property if they failed to perform adequate due diligence before making the purchase. While not required by law, performing an ESA is a practical necessity before buying a property. To not investigate a property before purchasing it is to risk becoming liable for cleanup—even if you didn’t make the mess in the first place.
Just doing no investigation and pleading ignorance will be no defense. To claim the innocent landowner defense, the law expects property purchasers to make “all appropriate inquiry (AAI) regarding the previous ownership and use of the property before acquisition.” So, if reasonable due diligence would have turned up the issue and you just didn’t do it, the law will hold you liable. And if your AAI investigation does discover an issue, you can proceed to purchase the property without becoming liable using the bona fide prospective purchaser protection.
Every property will become a brownfield at some points in its life. Every time a property is transacted it must pass the brownfield threshold as a new purchaser must ask the brownfield questions anew.
Brownfield grants, incentives and credits are often large factors in the capital stack when a property is transacted and developed. And while there is some divergence on how a brownfield is defined at the state level, there is even wider spectrum of development funds available to spark redevelopment—from assessment and cleanup grants, to Tax Increment Finance (TIF) districts, to ecological restoration credits and all manner of special incentive zones. The layers of local, state and federal funding available make a big difference on the bottom end of the real estate market, when traditional markets break down or get gummed up by complications, and projects need help getting off the ground.
Right now, a new bipartisan brownfield bill is currently making its way through Congress after many years of work to reauthorize the 2002 brownfield bill. And many cities and states are creating new programs and evolving existing ones to take on brownfields, blight, green infrastructure and other revitalization opportunities in a new wave of proactive policy and constructive posture towards real estate and economic development. Some jurisdictions limit the use of brownfield funds to properties that objectively are known to be contaminated (e.g., New York), while others make brownfield funds available to greyfield developments where there may be no actual pollution, but costly legacies from previous use (e.g., Michigan). Others are creating new programs and credits specifically for green infrastrastructure, stormwater management and other objectives.
With such incredible variety and innovation in the redevelopment space today, it’s easy to get lost. But there is one simple, basic brownfield rule to remember in all real estate development. Remember your brownfield ABC’s and always, always assess before closing.
"Brownfield" is only one tag in a Taxonomy you can use to categorize the specific property conditions and unique opportunities. Greenfield, brownfield, greyfield, bluefield, ecofield and many other condition, property and market tags can be used... and searched.
Learn more about how the Environmental Protection Agency (EPA) supports brownfield redevelopment on its website at https://www.epa.gov/brownfields