Environmental Lien and AUL basics

In 2005, the American Society of Testing and Materials introduced the new standard (ASTM Standard E-1527-05) for Phase 1 environmental site assessment reports, and environmental liens. The implementation of this standard was delayed until November 1, 2006.

For professionals who provide these Phase 1 ESA's, part of the accepted "All Appropriate Inquiries" includes searching title records for the subject property.

AFX Title Search, an authority on title searching since 1995, offers title search products tailored for these ESA's. Providers typically require searching for the following items:

• Environmental Liens
• AUL's
• Ownership history

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The standard specifies ‘environmental liens” by name, making it a crucial piece of included data in a Phase 1 ESA.
However, obtaining environmental lien records for a particular property is more complex than it appears. Initially, ESA providers turned to traditional real estate title abstractors to compile these search results. AFX has found  that environmental liens (and activity and usage limitations, or AUL’s) often are found in places outside the scope of a traditional real estate title search.
The definition of an environmental lien is much more broad in scope than a typical “property lien”. Real estate liens are clearly defined, and are located using traditional title searching methods, which have been used for decades. In addition, conventional real estate liens have a recording and indexing mechanism relatively uniform across various jurisdictions of municipalities, usually counties.
“Environmental Liens” are different in many ways. The types of records that can be classified as environmental liens come in a wide variety, and are recorded in dozens of dissimilar manners.
Originally, an environmental lien was a financial record of a debt, or financial liability, matching the obligation of a property owner to correct environmental damage. A simple example is a lien of a specified dollar amount, in response to a chemical spill at a property. The dollar amount corresponding to the amount required to rehabilitate the property to its pre-spill condition.
Since the introduction of the new ASTM standard in 2005, and its requirement since 2006, many other types of remedial records have been issued as environmental liens, and AUL’s. AFX has noticed that government and private agencies have recognized that environmental liens and AUL’s are now scrutinized as part of a property financing or transfer. These records are now part of a properties potential liabilities which must be addressed by the settlement system, as part of any property transaction.
Because of this, interested parties outside the normal environmental oversight entities are more often using environmental lien filings as a method to advance their interests. Since the resolution or acknowledgement of environmental liens is a contingency of a transaction, issues that were once disregarded for lack of an enforcement method are now being considered under the umbrella of environmental liens, or AUL’s.
Because of this, searching for environmental liens needs to go beyond the scope of a one-source research project. Environmental liens are no longer found only within the property records index. Items which could be considered to be an environmental lien can now be listed in dozens of systems and records offices.
As an example, AFX recently found a record of an AUL listed in the records of the Department of Fish & Game. In this instance, there was a large tract of land which contained several streams and branches. A was concrete pad was being installed on the property for a foundation of a small gazebo. During construction, some dry cement mix was lost into a feeder stream.
This stream fed waterways often used for recreational fishing by the public. The Department of Fish & Game created an AUL, restricting the property from being used for fishing, where fish would be used for human consumption. While this would not require any immediate action on the part of the property owner, any financing activity or transfer would trigger a Phase 1 ESA, and therefore an environmental lien search.
In order to resolve the ‘fish AUL” the owner would need to remedy the situation to the satisfaction of the Department of Fish & Game. In effect, the department now had a mechanism to enforce it’s interests, where none may have existed in the past. Previously, a minor spill of questionable severity such as this would not have any action taken since there would be little consequence.
Searching for environmental liens therefore requires a good-faith effort to locate these records in various places. The locations of the listings and documents varies by jurisdiction, and the type of property.
Quality vendors are not in abundant supply. Environmental lien searching is a relatively new industry. AFX/ TitleSearch.com / EnvironmentalLiens.com has been at the forfront of this industry since inception. Although there was some interest prior to 2005, searching for these records has not become common until late 2006. Most traditional real estate title researchers are not interested in this type of work, since it is a low-margin and tedious nature. The records are scattered across many different offices, and these searchers are used to going to one records room to pull documents.

A few examples of locations where environmental liens can be found are:

• Zoning records
• Licensing boards
• Environmental agencies
• Property records
• Department of revenue

Each state and county requires a different list of sources to search. In addition, these records may exist at the city, county, state, or federal levels. There may be dozens of locations to search on a particular property.

At AFX, we have had inquiries and orders for environmental lien searches since 2004. Over the years, we have developed a system to search the appropriate records offices specific to a particular county, city or municipality, depending upon where the property is located. We have learned that certain types of properties may need additional inquires to agencies which would not seem to be related to environmental liens.
For example, in certain states, we find environmental liens and AUL’s listed in the offices of licensing for occupations. The cosmetology licensing board may list an AUL or environmental lien if hair chemicals are not disposed of properly. They may have had little enforceable consequences prior to ASTM E-1527-05.
Selecting a quality provider of environmental lien searches is an important part of creating an ESA. Environmental lien searching has only been around for little more than a year. Be sure your provider understands the depth of this area of knowledge, and has the appropriate experience. Talking to a representative from a provider, and asking a few probing questions is usually enough to determine if the provider is knowledgeable.

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