Guiding Property Managers through Environmental Issues
Property Managers are an indispensable part of the real estate industry. They are the “eye on” people dealing with everything from tenant relations to trash disposal, and are the early warning in keeping the property in good order. Today, they are usually third party entities who contract with the owner or asset manager.
In the late ‘80s and ‘90s I led a small in-house environmental management team relying on third party environmental consultants for due diligence and other advisory services at a full service property management company. Because it was an integrated services company, decisions could rise to the top.
The company had a Standard Operating Procedures (SOP) Manual that was provided to every on-site property management office. It covered everything from bookkeeping to tenant relations, leasing, construction, engineering and building maintenance. Together with the assistance of a third party firm, I prepared a chapter for the SOP dealing with real estate and business environmental risks. Environmental issues affect all real estate sizes and types, and property managers – the people closest to the property – should have guidance on how to best prevent contamination and respond to spills at their property.
Dealing with Environmental Conditions at a Property – from Then to Now
The 15-page document was detailed, providing guidance on a wide range of issues that a property manager may face. Here is part of the introduction:
The properties in the company portfolio must be maintained in compliance with Federal, State and Local environmental laws and regulations. The eventual sale of a property must not be burdened by the discovery of any areas of non-compliance, such as unregulated disposal of hazardous waste, non-compliance with the reporting requirements of various regulations or actual contamination of the property.
Interestingly, although the document was written more than 20 years ago and there have been many changes in the real estate industry since, all the items discussed continue to be important elements that should be considered in responsible property management today. Let’s take a look at a summary of the various topics that were addressed in the manual:
The SOP stipulated that prospective industrial tenants were required to complete a detailed form describing their use of hazardous materials, including the quantity, time on site, storage methods, disposal methods and the availability of Material Safety Data Sheets to name a few (I’ll go into the details of managing industrial properties in an upcoming blog). Tenants who may handle hazardous materials – such as photographic developers, paint stores or beauty salons – were noted as spaces that should be periodically visited by the property managers with any issues to be reported to the Environmental Group. Those who stored hazardous materials need to maintain a Spill Prevention Control and Countermeasure Plan (SPCC Plan) on site, which should be written by a third party consultant such as an environmental professional.
Office tenants were also required to list any hazardous materials planned to be in their space. An example of when hazardous materials management became important is when a printing company (before the age of Kino’s) was locating on the first floor of an office building. During this period, xerographic printing cartridges still contained small amounts of copper and cadmium, and the fine carbon dust had a silica component. Because of this, the prospective cartridge storage and method of spill remediation and environmental cleanup was critical, and had to be thoroughly reviewed before it was accepted. In addition, the heat generated by the machines had to be accommodated by a separate HVAC system, designed with special exhaust filtering.
2. OUTSIDE VENDORS
Landscaping contractors had to submit a list of pesticides and insecticides proposed for use at the subject property. Janitorial companies were required to keep copies of the Material Safety Data Sheets on site for their chemicals, and should provide a list of the hazardous materials stored on site. All outside vendors must maintain an appropriate “spill kit” for control and cleanup in the event of a spill of their materials. Vendors were required to provide training for the use of these kits as well as handling of hazardous materials.
3. PROPERTY GENERATED HAZARDOUS WASTE
A property itself typically generates little, if any, regulated hazardous waste. An exception to this are certain products used in some central HVAC systems, boilers or fluorescent lamps. The guidance document stated that a licensed hazardous waste transporter must be engaged to take such waste to an appropriate landfill. The waste is to be accompanied by an EPA Hazardous Waste Manifest filled out by the transporter and signed by the property manager. The manifest will list the ownership entity of the property, not the property management company, as the waste generator.
Fluorescent lamps became a serious issue in the 1990s. There were a few recyclers that could hand large quantities, but some involved significant shipping charges for large office buildings. Luckily, our team was able to locate a recycler one in Minneapolis that was able to handle the waste from our downtown high rise office building. Today, the service is much more widely spread geographically.
4. HAZARD COMMUNICATION AND “COMMUNITY RIGHT TO KNOW”
Just as the tenant is required to inventory his hazardous materials, the manual stipulated that the property manager should develop a list of all hazardous materials the property stored on site along with Material Safety Data Sheets for each material. Copies should be kept in the office and at the storage locations.
Notification to tenants in buildings containing asbestos is done by the property manager with the involvement of senior management and the Environmental Group. Buildings with asbestos were to be managed in accordance with the EPA guidelines “Managing Asbestos in Place” and 3rd party consultants, and abatement projects should be performed with 3rd party consultants.
During my tenure at this company, three office buildings in the company’s portfolio had asbestos fireproofing: one building was completely abated while occupied, one commenced planning and the third (the smallest) continued work using the EPA guidelines.
An extensive discussion was included in the SOP regarding leasing discussions, management approach and construction procedures in buildings with asbestos.
6. PROPERTY REVIEWS
The property managers are the eyes and ears for ownership. Regular inspection of the exterior of industrial and retail sites which have major exterior exposure is very important. A portfolio-wide program for industrial properties will be discussed in an upcoming blog. Here is an example from my time on this environmental management team:
A multi-building industrial site with an adjacent railroad right-of-way was acquired as part of a corporate acquisition transaction where little interest was in the properties that came with the deal. Also, at the time no real estate due diligence was being done. A number of years later the property was up for sale and the buyer’s consultant identified serious soil stains in the area between the tracks and the building wall. This turned out to be significant contamination, most likely from “midnight dumping”. During the period of ownership there was no Environmental SOP and the property manager had no direction on routine walks.
In another example, the manager of a large grocery-anchored shopping center was making his routine early morning walk when he noticed staining around a storm drain grating in the parking lot. This was another midnight dumping. He called the environmental group who mobilized local consulting and site mitigation firms. Notices were filed and the issue was closed.
7. UNDERGROUND AND ABOVE-GROUND STORAGE TANKS
The environmental group kept a database of all property-owned tanks with physical information and compliance history. The manual indicated that the Engineering Department was responsible for property-owned tanks tightness testing.
Tenant- owned tank information was collected by property management using the tenant pre-leasing forms.
8. SPILL PREVENTION
The manual stated that a property manager must be aware of the conditions of the property-owned hazardous materials at the property. This section includes a number of practical things the property manager can do on a regular basis to prevent spills, including: not storing hazardous materials in electrical rooms; replacing leaking containers; moving containers from walkways and keeping the containers closed when not in use and noting the length of time the materials are on the property by labeling. The property manager is encouraged to be ‘alert, think safety and act responsibly’, and a checklist is provided for his/her periodic walkthrough, which describes items to look for. In addition the property must have its own Spill Prevention Control and Countermeasure SPCC Plan.
Tenant complaints regarding indoor air quality shall be immediately addressed by Property Management and Engineering in coordination with the Environmental Group. Indoor air concerns, complaints and issues must be effectively managed to avoid the perception that a property has “sick building syndrome“. Each individual event shall be handled separately in coordination with the Environmental Group. Only the Environmental Group can authorize and manage indoor air quality assessments or samplings including mold assessments.
All these items that I’ve summarized continue to be as important to property managers today as they were twenty years ago. Internal Operating Procedure Manuals can provide useful, general guidance to property managers on how to address environmental issues, but it is a property manager’s responsibility to recognize when advice from a registered environmental professional (EP) may be required to prevent or clean up contamination.
A full service environmental consulting firm can provide the operational assessments, advice and management services – including: developing Health and Safety Plans, SPCC plans, hazard communication and right-to-know support or industrial hygiene assessments; and facilitating proper Hazardous Materials Management, loss prevention and risk management and remediation programs to help a property manager to adequately address environmental issues.