Activity and Use Limitations

In many instances, exposure to soil, groundwater contamination and vapor on a commercial property can be limited by federal and state regulatory bodies through “Activity and Use Limitations” or AULs.  Information regarding AULs is typically contained in the “restriction of record on the title.” Most Phase I Environmental Assessments identify AULs associated with the subject property and the future restrictions they impose. However, it is crucial that the environmental assessment also address how these AUL restrictions can impact future property use.

The purpose of the AUL is to limit exposure pathways for chemicals of concern.

The two types of AULs typically encountered during the lending process are Engineering Controls and Institutional Controls.  Engineering Controls are engineered barriers that prevent human contact with contaminants when accessibility, technology and/or expense prohibit remediation to regulatory standards.  Examples of Engineering Controls include a concrete cap or pavement over contaminated soil to prevent contact with contaminants or vapor barriers such as membranes and/or sub-slab depressurization systems that prohibit vapors from entering structures.

Institutional Controls, sometimes called Administrative Controls, are AULs that legally prohibit onsite activities and/or actions that place the public at risk.  Examples of Institutional Controls include:

  • Groundwater restrictions that prevent the installation of potable and/or irrigation wells on or near a contaminated property.
  • Land use restrictions that prohibit residential use and restrict the property to industrial or commercial use only.  Special uses, such as day care centers, medical facilities, elderly care facilities and residential care facilities, may be prohibited as well.
  • Periodic inspection and certification of engineering control maintenance.
  • Public notification, signs, markers and fencing restricting access to areas of contamination.

Providing public notice and recording the AULs on the deed are typically required by state regulatory agencies as a stipulation for regulatory closure, No Further Action (NFA) and Certificate of Completion.  AULs can also be associated with finalized Brownfields agreements.  Failure to adhere to the restrictions may void any release from liability associated with the closure or agreement.  Information regarding the AULs is typically contained in the “restriction of record on the title.”

It is important that lenders understand any AULs associated with a collateral property and how those AULs might affect the planned use of the site and ongoing responsibilities of the borrower.