Insulating against Asbestos Liability

By Schnapf, Larry | Journal of Property Management, March-April 1990 | Go to article overview

Insulating against Asbestos Liability


Schnapf, Larry, Journal of Property Management


Insulating against asbestos liability Increasingly stringent federal and state asbestos cleanup laws are imposing substantial legal and financial burdens on owners and operators of commercial buildings laden with asbestos-containing materials (ACM). As a result, landlords are having problems finding tenants, owners are offering steep discounts to lure reluctant purchasers, and buyers are having problems lining up lenders and other institutional investors who are fearful of becoming targets of lawsuits.

In some areas of the country, the sales price of office buildings with ACM has been discounted as much as 20 percent while rents have been reduced by as much as 15 percent.

Many financial institutions are shunning buildings with ACM because they are afraid they will be sued by victims of asbestos for wrongfully facilitating a sale of a building with ACM or fear that they will be liable as owners if they foreclose on the property and the aCM is mishandled or wronghfully disposed. Indeed, the Federal National Mortgage Association (Fennie Mae) has instituted an environmental hazards management program which contains comprehensive asbestos inspection requirements. The effect of these and federal or state asbestos regulations has been to reduce the amount of mortgage money available for rehabilitation or refinancing.

Until the dangers of asbestos became known, asbestos was used extensively to insulate, fireproof, and soundproof the majority of commercial buildings constructed between 1920 and 1970. Indeed, many municipal building codes mandated that asbestos be applied to new buildings. Asbestos is also found in acoustical plaster, wallboard, ceiling panels, floor tiles, roofing materials, reinforcements in concrete waterpipes, and as a thermal insulator in boiler and HVAC rooms.

A recent study published by the U.S. Environmental Protection AGency (EPA) found that 733,000 of the 3.5 million public and commercial buildings in the United States have ACM, and 500,000 or 14 percent of those buildings will require some sort of cleanup work while 317,000 contain significantly damaged ACM. A separate report conducted by New York City revealed that 68 percent of the buildings surveyed contained asbestos and that 87 percent of those buildings posed some risk to their occupants because the asbestos was damaged.

Despite the hazard posed by ACM, it was not until the EPA began aggressively enforcing existing federal asbestos regulations and states began adopting asbestos cleanup laws that building owners and operators became concerned about asbestos.

Federal regulation of asbestos

Asbestos is regulated by the federal government under a number of laws. The regulations of chief importance to building owners and operators are the asbestos standards established under the National Emission Standards for Hazardous Air Pollutants (NESHAPs) of the federal Clean Air ACt, which ban spray applications of ACM in new buildings and also established procedures for demolition and renovation of buildings containing friable ACM.

Under the Clean Air Act regulations, all owners or operators of a building that has friable ACM, which is ACM that can be crushed into powder by hand, are required to notify the EPA at least 10 days before commencing demolition or renovation work. The agency must be provided with the name and address of the owner or operator, a description and location of the building being demolished or renovated, and an estimate of the amount of friable asbestos in the building.

If the amount of friable asbestos within the building exceeds 260 linear feet or 160 square feet, the owner or operator must also follow certain work practices designed to control asbestos dust emissions during removal and storage. Materials containing friable ACM must be properly disposed of at an approved waste disposals site. If an owner or operator fails to comply with these regulations, the government may seek an injunction halting the operation and assess penalties.

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Insulating against Asbestos Liability
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