?One of the most concerning tenants of commercial property from an environmental perspective is the   dry-cleaner using perchloroethylene (Perc). Whether currently located at a property or historically discovered to have existed, if they used this solvent in the process of cleaning clothes, the potential exists that this toxic agent has impacted the property. When handled improperly or accidently discharged, the potential impact to the soil, groundwater and the air quality within the boundaries of the building and beyond are significant. Many of these operations were small family-owned business that occupied less than 3,000 s/f. Combined with the fact that the solvent clings to the soil and sinks beneath the groundwater, it does not take a lot Perc to cause an expensive problem. Environmental consultants for many years have been advising clients about the potential concern to a less than enthusiastic audience. Owners of properties refinancing with a lender typically don’t want to hear about this potential threat as they may be the ones ultimately paying for the damages caused. Lenders anxious to make a loan and not understanding of the threat can also be reluctant to delay a closing to allow time for more testing.

Two developments on the federal government’s part will help eliminate the risk of these operators. Since the issue of dry cleaners has risen to such a level of concern that the Small Business Administration (SBA) recently amended their protocols (January 2018) to require a “phase 2” investigation when a dry cleaner using Perc or hydrocarbons is present or discovered to have been present at a property. No longer does the consultant preparing the report make the determination as to whether more investigation (phase 2) is warranted. Many business owners taking advantage of the SBA program will now need to factor in this additional cost if at some point in the history of the property a dry cleaner existed.

For more information on the new SBA protocols, visit https://www.sba.gov/document/sop-50-10-5-lender-development-company-loan-programs?utm_medium=email&utm_source=govdelivery . The new environmental protocols are published on page 314.

The second development to reign in dry-cleaners was originally outlined over a decade ago when the federal government set a deadline of 2020 for all dry cleaners using Perc in residential apartment buildings to cease. The article on this looming deadline was published in a Crain’s New York Business in 2016. Once deemed a very far into the future time frame, is now less than two years from implementation.  There are an estimated 400 dry cleaners throughout New York City that operate in apartment buildings and use “Perc.” The main concern in is that vapors are escaping from the rooms in which drycleaning equipment is located (typically the ground floor of a building) into the units above. In 2017, the New York City Health Department responded to over 250 complaints about odors coming from dry cleaners emissions. The studies conducted have focused on the harm caused to the liver and kidneys that appear to be the most susceptible organs when exposed to the toxic solvent. Owners of drycleaners using Perc need to figure out how to change their business model and use more environmentally friendly agents or switch to a drop off only site.  

In order to determine if harmful vapors are present, air testing needs to be conducted. Further complicating the issue for building owner’s is the fact that when air testing results in residential apartments are above the health department guidelines there may be an obligation to notify the tenants. Since vapor testing is relatively new in the environmental due diligence arena, building owners should consult with their own advocates with this expertise prior to any testing being conducted.  

For more information on the phase out, visit: http://www.crainsnewyork.com/article/20160508/SMALLBIZ/160509884/perchloroethylene-used-by-new-york-city-dry-cleaners-under-the-name-perc-has-been-a-concern-for-decades-leading-to-concerns-about-workers-and-environmental-health-risks

Since the 1970s, federal regulators have been focusing on dry-cleaners and their impact to the soil and groundwater beneath a property (and beyond) as many of the superfund cleanup sites across the country are former dry cleaners. So, it is not surprising that consultants working for real estate investors and lending institutions are very concerned when they discover one occupying a property or existed in the past. In addition, when there is evidence of a dry cleaner operating next door or used to operate next door to a site a client wants to purchase, consultants need to be pointing out this potential threat.  Lenders and real estate investors need to not only be concerned with the value of the real estate being impacted from issues under the building but whether tenants in a building are being exposed to harmful vapors.  A monetary loss to the value of real estate is one issue, but when the vapors of dry cleaners start migrating into the areas where people live and work at dangerous levels, the liability can be much greater. 

Chuck Merritt, LEED AP, is the president of Merritt Environmental Consulting Corp., Hauppauge, N.Y.