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In the course of our appraisal work we frequently see NFR letters associated with contaminated properties. While the NFR letter is desirable to have, it may give a false sense of security to the prospective buyer or lending institution, since it does not entirely absolve either of liability or risk.
Since the implementation of TACO (Tiered Approach to Corrective Action Objectives), the Illinois EPA has issued many NFR letters, which allow residual contamination to persist by relying on engineered barriers and institutional controls to limit impacts on soil and/or groundwater. Although beneficial in returning some properties to productive use, or in fostering redevelopment, the approach has engendered much confusion, in that the letter is commonly misinterpreted as signifying that a site is clean. In point of fact, for commercial and industrial properties, the NFR implies that the site is still contaminated, just not so contaminated as to have required further action under rules in place as of the date issued. While this may, or may not, affect the ability to obtain financing, or to continue using the site, it may impact its marketability (due to stigma) and its potential for redevelopment.
In reading an NFR letter, you will encounter a statement citing potential causes for it to be voided such as:
Subsequent discovery of contaminants, not identified as part of the investigative or remedial activities upon which the issuance on the Letter was based, that pose a threat to human health or the environment.
This means that after an NFR has been issued, a subsequent discovery on the site, a tightening of regulations or a new “contaminant of concern (CoC)” added to the list, are potential reasons for voiding the NFR.
As observed by Matthew E. Cohn, an attorney with Arnstein & Lehr:
[1] “What Is So Great about a ‘No Further Remediation’ Letter Anyway?” Environmental Leader, November 2013, viewed on environmentalleader.com.
A recent point of concern for example is the uncertain effect new Vapor Intrusion (VI) rule issued in 2013 might have on existing NFR letters which were based on site analyses that did not consider the VI pathway.
The key take-away points with respect to the NFR are:
Mr. Cohn observed that, because it is voluntary, an NFR letter can be as broad, or as narrow, as the applicant wants it to be, by focusing on specific contaminants, future land use consideration, and the types of activity restrictions and engineered control, which may or may not have wide acceptance in the market (see Matthew E. Cohn, 2013).
