Brendan Schain Authors HBJ Article: "Transfer Act Sunset Reshapes Environmental Risk in Connecticut Real Estate"

On March 1, the Connecticut Transfer Act finally sunset and was replaced with a Release-Based Cleanup Program.

This change has real estate developers and lenders, among others, reconsidering how to quantify and manage environmental risk.

The Transfer Act used the transfer of ownership of certain properties or businesses as a trigger to require a comprehensive and closely regulated environmental investigation. Those required investigations had to follow a single, prescribed path for identifying pollution and addressing whatever is found.

The new program is different. It does not require investigation of any property. Like the cleanup programs in nearly all other states, the release-based system relies on the market to drive investigations. It imposes no requirements unless and until pollution is found.

That is, reporting and remediation may be required but only if historical pollution is “discovered.” This is a generational shift in the state’s approach to addressing historical pollution.

To many, the flexibility created by relying on market-driven investigations may be perceived as uncertainty, but it should be seen as an opportunity. Investigation is often related to a business decision to buy, sell or finance property, or start construction.

Buyers, sellers, developers and lenders making these decisions each have different risk tolerances. And, while many properties have been investigated to some extent over time, every identified environmental concern poses different risks.

Because every property and every business decision is different, there is no longer a single, prescribed path to follow.

At this moment of transition, developers and lenders in particular should think hard about whether, and how much, investigation should be performed and what it will mean if the investigation identifies a historical release of pollution.

While nobody in Connecticut has had to make decisions quite like this before, the “uncertainty” that many feel now is a feature of the new program, not a bug. Those that understand the new program will be able to take advantage of the flexibility it provides to facilitate transactions and drive redevelopment.

Evolving cleanup standards

Right now, anyone involved in Connecticut real estate should start by focusing on how due diligence is performed. The release-based program is designed to allow a potential buyer to investigate a parcel and identify historical pollution without triggering regulatory obligations to report or remediate.

However, if the property owner — either the current owner or the buyer post-closing — has knowledge of the presence of historical pollution, the new program will require them to take some action.

Lenders also must consider whether, and when, sampling should be required as a step in the process of obtaining a loan, as those sampling results may subject their borrower to the requirements of the release-based program, including reporting the discovery of pollution to the state.

The new program also brings changes to Connecticut’s cleanup standards, including new “permits-by-rule” for managing historical fill and preventing exposure to polluted soil that are faster and less expensive than older approaches, as well as other new provisions that will relieve some burdens on properties impacted by releases that occurred off-site.

These revisions to the cleanup standards apply to all properties, even properties already subject to the Transfer Act because of a pre-March 1, 2026 transfer. Anyone currently responsible for remediating a property should consider whether these changes can be used to reach an endpoint more quickly.

This article originally appeared in the Hartford Business Journal.