Connecticut’s Environmental Regulatory Overhaul Opens Door for New Real Estate Development

Connecticut is ending its decades-old Transfer Act, a law widely seen as a major obstacle to property transactions, and replacing it with a release-based cleanup program that gives buyers, sellers, and lenders more control over environmental due diligence. The transition, effective March 1, 2026, represents a fundamental shift in how the state manages historical pollution.

The Transfer Act required environmental investigation and, if necessary, remediation whenever certain properties or businesses changed hands, regardless of whether contamination was suspected. This blanket approach often stalled transactions, saddled some owners with costly obligations, and left others untouched solely because the law defined “establishments.” Brendan Schain, a partner at Shipman & Goodwin LLP and a key architect of the new rules, describes the old law as “an unfair system,” explaining that it imposed requirements unevenly based on past land use and business activity.

Connecticut was one of only two states still using this model. Most of the country already relies on release-based cleanup programs, which trigger action only after actual contamination is discovered.

A Regulator's Perspective
Schain brings direct experience on both sides of the process. Before joining Shipman & Goodwin in December 2025, he spent 13 years at the Connecticut Department of Energy and Environmental Protection (DEEP), where he served as legal director for the environmental quality branch and helped lead the shift to release-based regulation. He wrote much of the new regulatory language and oversaw the years-long rulemaking process.

Schain describes the move from regulator to private practice as a unique opportunity to help clients adapt to the system he helped design. He notes, “It’s a really exciting transition for me to move from being a regulator to helping clients navigate complex regulatory systems, including the new release-based cleanup program.”

The overhaul was the result of five years of monthly meetings of a working group of between 60 to 70 stakeholders — including environmental lawyers, consultants, and municipal officials — who worked to ensure the new rules reflected the realities of modern property transactions.

Market-Driven Investigation
The most significant change under the new system is the shift from mandatory, state-defined investigation to a market-driven approach. Under the Transfer Act, certain properties were subject to a rigid state standard for environmental assessment, regardless of actual risk or the parties’ needs. The new framework eliminates this requirement, allowing buyers, sellers, and lenders to negotiate the scope of the investigation and the standards to be used.

“Investigation will now be market-driven,” Schain explains. “Parties to a transaction can decide how much investigation they want to do and to which standard.” The controversial “site characterization guidance document” that once dictated how investigations were performed is no longer mandatory. Now, standards are negotiated between parties based on transaction needs and risk tolerance.

This approach aligns Connecticut with most other states and provides market participants with greater flexibility. However, it also places greater responsibility on buyers, sellers, and lenders to decide when to investigate and how much information to share. Discovering contamination can still trigger mandatory reporting and cleanup, so due diligence decisions may become more strategic and nuanced.

Transitioning Legacy Sites
A key concern is how properties subject to the Transfer Act will transition to the new system. Sites already subject to Transfer Act requirements will remain under that regime. “There are sites that have been in the Transfer Act for a very long time where there may have been missed filings, or where only some releases are required to be cleaned up because of their age,” Schain says. He notes that navigating these “legacy” sites will require careful analysis to determine which rules apply and when.

This complexity also reflects Connecticut’s industrial history. Many manufacturing facilities that left the state in the 1990s abandoned their properties rather than face the Transfer Act process, leaving contaminated sites idle in city centers and village hubs. The old law’s rigidity contributed to a backlog of properties that remained undeveloped because owners wanted to avoid triggering investigation and cleanup requirements.

Economic Impact
The Transfer Act’s reach extended far beyond individual transactions. Its prescriptive requirements discouraged out-of-state developers and lenders, many of whom were unfamiliar with Connecticut’s unique system and wary of its transaction-triggered obligations. Schain notes that this limited capital flow into the state, making it harder to repurpose former industrial sites or attract new investment.

“People don’t want to do things that are different or that they’re not used to,” Schain says. “It limited the pool of out-of-state developers who would come into the state to do business.”

The new release-based system aims to remove these barriers while maintaining strong environmental protections. Properties that sat idle for years to avoid Transfer Act scrutiny may now be viable for redevelopment, especially as demand grows for walkable, mixed-use neighborhoods on previously industrial land.

Practical Steps
The regulatory change requires careful attention from anyone buying, selling, or financing property in Connecticut. Schain advises that decisions about investigation and remediation should be tailored to the details of each deal, taking into account the parties’ risk tolerance and the property’s history.

“It’s an important time to get good counsel from an environmental attorney and a consultant that understands the new process and the new regulations,” he says.

Standard transaction documents will also need updating. Lease agreements, purchase and sale contracts, and business acquisition documents drafted under the Transfer Act may inadvertently trigger unnecessary investigation or reporting under the new rules. Schain cautions that simply reusing old templates can lead to unexpected requirements and liabilities. “People are starting to grapple with what changes need to be made,” he explains.

Adjusting to the New Framework
While most market participants agree the new system is an improvement, Schain acknowledges that adaptation will take time. Those who regularly handle property transactions are likely to adjust quickly, but less frequent buyers and sellers may need more time to become comfortable with the new requirements.

Close attention will be paid to how due diligence standards are set and shared, whether the rules around reporting new contamination are clear and workable, and how the state manages the backlog of legacy Transfer Act sites. The effectiveness of new cleanup standards, intended to make certain types of remediation faster and less expensive, will also be monitored by regulators and the market.

“It’s a big new program with long and complicated regulations and requirements, so there is some uncertainty about how it will play out in practice,” Schain says. “But I think generally the climate is really positive.”

A New Era for Connecticut Real Estate
Connecticut’s move from a prescriptive, transaction-triggered environmental law to a flexible, market-driven framework marks a significant turning point for the state’s real estate market. The end of the Transfer Act removes a longstanding obstacle to investment and development, opening the door for new projects on underused land while maintaining environmental safeguards.

For developers, lenders, and property owners, the new system offers more control over due diligence and risk management, but also demands greater expertise and attention to detail. Those who adapt quickly — and seek knowledgeable guidance — will be best positioned to capitalize on opportunities as Connecticut’s real estate landscape enters a new era of growth and redevelopment.

This article first appeared on the Keycrew Journal website and is published here with permission.