Environmental Update 2015
Southeastern Small Business Lenders Conference
Environmental Update 2015
Environmental investigations are required on all commercial property upon which a security interest is obtained. Environmental Policies & Procedures apply to all 7(a) Lenders and CDCs, whether or not the report must be submitted to SBA for approval SOP provides minimum standards; Prudent lending may dictate additional investigation or safeguards
All Hands on Deck
Phase II Appendix 4 NAICS Code?
Phase I
Assessment process should never start with a Phase II. Phase I must be less than 6 month old.
COST
Transaction Screen
Loan Value $150,000 or less?
Questionnaire plus RSRA
Questionnaire
RSRA are screening tools for low-risk properties.
Privateering & Lender Preference Restrictions A lender may not take any action in connection with an SBA-guaranteed loan that establishes a preference in favor of the lender. (13 CFR 120.411)
The Lender’s due diligence must represent the more “strict” or “conservative” of the SBA’s Environmental Policy or their own environmental policy.
THE HOOK INITIAL ELIGIBILITY DETERMINATION FOR CONVENIENCE STORES
Relevant Documents (Georgia) Purchase and Sale Agreement Fuel Supply Agreement/ Branding Agreement
Unacceptable Results Affiliation
Title Search with Copies of Applicable Documents Impairment of collateral value and marketability of the property
Alteration of SBA or Lender’s Legal Rights, Remedies or Responsibilities
A PIRATE LOVES NOTHING MORE THAN THE C
Investigation of Convenience Store
Required whenever gas station or commercial fueling facility is used as collateral (real estate, including leasehold, or personal property)
Start with Phase I which includes a determination of compliance with tank & equipment testing requirements
Include an analysis of all relevant records regarding the property and adjoining properties
If recommended by Phase I, requires a Phase II (testing) by Professional Engineer or Professional Geologist with 3 years relevant experience, or other recommended steps
If contaminated, include description and cost estimate for remediation
COMPLY OR DIE Gas Station Equipment Testing Appendix 5: “The Environmental Investigation performed by the Environmental Professional must include a determination whether or not the gas station is in compliance with all state requirements, if any, pertaining to tank and equipment testing. A loan may not be disbursed until full compliance is achieved. Further, any leaking or otherwise defective equipment, systems, containment devices, etc., if any, must be replaced or repaired prior to disbursement. “
Jan 2015 Screen-out:
Documentation supporting the determination must also be submitted including tank and equipment test results… The Phase I report includes a statement regarding a 2010 compliance inspection and July 2013 tank testing, but does not include a determination whether or not the gas station is in compliance with all state requirements, if any, pertaining to tank and equipment testing.
Letters of Marque & Indemnification Requirements for Gas Stations • Environmental Indemnification Agreement required only in cases of contamination and change of ownership, where it is required
• Must use Appendix 6 format •
Must be executed by the seller (waiver available where Seller is an estate, a bankruptcy trustee, etc.)
• Where Third Party has right of Indemnification against future owners, they may be required to waive right to indemnification and release all claims against SBA and Lender
THE POOP DECK Additional Steps for Special Use Facilities
Example of Special Use: Property constructed prior to 1980 that will be used for child care or residential care occupied by children Historical Dry Cleaners or Dry Cleaners more than 5 years old.
Additional testing dictated by prudent lending practices ASBESTOS LEAD-BASED PAINT
LEAD IN DRINKING WATER RADON
PHASE I & PHASE II SOIL/GW TESTING
Batten Down the Hatches
Vapor Intrusion and Vapor Encroachment
CAT O NINE TAILS Mitigating Factors for Impacted Property (1) Indemnification - from Seller or Resp. Party - using SBA Format
(2) Completed Remediation (w/o NFA) - Active Remediation “completed” - One Year Monitoring Data - Owner in Compliance (3) No Further Action Determination (4) Minimal Remediation Required - W/respect to property value & resources of Responsible Party - Cleanup will be completed w/in one Year
(5) Gov’t Cleanup Fund (Trust Fund)
(6) Escrow Funds - 150% Est. Cleanup Cost - May be used for Cleanup - Loan may not be source of Escrow (7) Groundwater Impact from Another Property - Plus gov’t assurance of liability protection by letter or regulation (Don’t need to demonstrate that collateral value & marketability have not been impacted.)
(8) Additional or Substitute Collateral (9) Other Factors - Insurance, bonds, etc. - Must be cleared by SBA Environmental Committee
KEEL HAULING Common Environmental Screen-Outs 1. No Reliance Letter or Reliance Letter modified
2. Not getting both past and present NAICS codes 3. No Certificate of Professional Liability Insurance of at least $1 Million
4. Not addressing Special Use Facilities building in 1980 or earlier, or not addressing dry cleaners more than 5 years old 5. Not addressing historical and adjoining property uses in questionnaire 6. Address discrepancies between environmental docs & CDC Checklist 7. Questionnaire not signed by owner/operator & CDC/Lender 8. Not addressing supply wells on the property 9. Recommendations of Env. Professional not addressed
The World’s End
Environmental Update 2015
Environmental investigations are required on all commercial property upon which a security interest is obtained. Environmental Policies & Procedures apply to all 7(a) Lenders and CDCs, whether or not the report must be submitted to SBA for approval SOP provides minimum standards; Prudent lending may dictate additional investigation or safeguards
All Hands on Deck
Phase II Appendix 4 NAICS Code?
Phase I
Assessment process should never start with a Phase II. Phase I must be less than 6 month old.
COST
Transaction Screen
Loan Value $150,000 or less?
Questionnaire plus RSRA
Questionnaire
RSRA are screening tools for low-risk properties.
Privateering & Lender Preference Restrictions A lender may not take any action in connection with an SBA-guaranteed loan that establishes a preference in favor of the lender. (13 CFR 120.411)
The Lender’s due diligence must represent the more “strict” or “conservative” of the SBA’s Environmental Policy or their own environmental policy.
THE HOOK INITIAL ELIGIBILITY DETERMINATION FOR CONVENIENCE STORES
Relevant Documents (Georgia) Purchase and Sale Agreement Fuel Supply Agreement/ Branding Agreement
Unacceptable Results Affiliation
Title Search with Copies of Applicable Documents Impairment of collateral value and marketability of the property
Alteration of SBA or Lender’s Legal Rights, Remedies or Responsibilities
A PIRATE LOVES NOTHING MORE THAN THE C
Investigation of Convenience Store
Required whenever gas station or commercial fueling facility is used as collateral (real estate, including leasehold, or personal property)
Start with Phase I which includes a determination of compliance with tank & equipment testing requirements
Include an analysis of all relevant records regarding the property and adjoining properties
If recommended by Phase I, requires a Phase II (testing) by Professional Engineer or Professional Geologist with 3 years relevant experience, or other recommended steps
If contaminated, include description and cost estimate for remediation
COMPLY OR DIE Gas Station Equipment Testing Appendix 5: “The Environmental Investigation performed by the Environmental Professional must include a determination whether or not the gas station is in compliance with all state requirements, if any, pertaining to tank and equipment testing. A loan may not be disbursed until full compliance is achieved. Further, any leaking or otherwise defective equipment, systems, containment devices, etc., if any, must be replaced or repaired prior to disbursement. “
Jan 2015 Screen-out:
Documentation supporting the determination must also be submitted including tank and equipment test results… The Phase I report includes a statement regarding a 2010 compliance inspection and July 2013 tank testing, but does not include a determination whether or not the gas station is in compliance with all state requirements, if any, pertaining to tank and equipment testing.
Letters of Marque & Indemnification Requirements for Gas Stations • Environmental Indemnification Agreement required only in cases of contamination and change of ownership, where it is required
• Must use Appendix 6 format •
Must be executed by the seller (waiver available where Seller is an estate, a bankruptcy trustee, etc.)
• Where Third Party has right of Indemnification against future owners, they may be required to waive right to indemnification and release all claims against SBA and Lender
THE POOP DECK Additional Steps for Special Use Facilities
Example of Special Use: Property constructed prior to 1980 that will be used for child care or residential care occupied by children Historical Dry Cleaners or Dry Cleaners more than 5 years old.
Additional testing dictated by prudent lending practices ASBESTOS LEAD-BASED PAINT
LEAD IN DRINKING WATER RADON
PHASE I & PHASE II SOIL/GW TESTING
Batten Down the Hatches
Vapor Intrusion and Vapor Encroachment
CAT O NINE TAILS Mitigating Factors for Impacted Property (1) Indemnification - from Seller or Resp. Party - using SBA Format
(2) Completed Remediation (w/o NFA) - Active Remediation “completed” - One Year Monitoring Data - Owner in Compliance (3) No Further Action Determination (4) Minimal Remediation Required - W/respect to property value & resources of Responsible Party - Cleanup will be completed w/in one Year
(5) Gov’t Cleanup Fund (Trust Fund)
(6) Escrow Funds - 150% Est. Cleanup Cost - May be used for Cleanup - Loan may not be source of Escrow (7) Groundwater Impact from Another Property - Plus gov’t assurance of liability protection by letter or regulation (Don’t need to demonstrate that collateral value & marketability have not been impacted.)
(8) Additional or Substitute Collateral (9) Other Factors - Insurance, bonds, etc. - Must be cleared by SBA Environmental Committee
KEEL HAULING Common Environmental Screen-Outs 1. No Reliance Letter or Reliance Letter modified
2. Not getting both past and present NAICS codes 3. No Certificate of Professional Liability Insurance of at least $1 Million
4. Not addressing Special Use Facilities building in 1980 or earlier, or not addressing dry cleaners more than 5 years old 5. Not addressing historical and adjoining property uses in questionnaire 6. Address discrepancies between environmental docs & CDC Checklist 7. Questionnaire not signed by owner/operator & CDC/Lender 8. Not addressing supply wells on the property 9. Recommendations of Env. Professional not addressed
The World’s End
