Since many M&A transactions involve transfers of real estate, we are hopefully not straying too far afield (pun intended) in noting that the repeal of the Indiana Responsible Property Transfer Law (a/k/a IRPTL) became effective July 1, 2014. IRPTL’s time seemed to have come and gone and its repeal is unlikely to affect Indiana M&A deals in a significant way.
IRPTL required sellers of certain Indiana commercial and residential real estate to provide a state-mandated environmental disclosure form to buyers, and to record the form in the real property records. Disclosure and filing was also required in connection with loans secured by certain real property (although lenders could waive the requirement).
IRPTL only applied in transactions dealing with (a) real estate parcels containing a regulated underground storage tank (or UST); (b) properties subject to reporting under Section 312 of the federal Emergency Planning and Community Right-to-Know Act (which requires, essentially, that Material Safety Data Sheets are made available to fire officials with respect to properties where certain hazardous materials are used or stored); or (c) parcels listed on the EPA’s database of hazardous waste and remediation sites (i.e., the elegantly named Comprehensive Environmental Response, Compensation and Liability Information System (CERCLIS)).
The repeal of IRPTL eliminates one potential headache because failure to comply was grounds for pre-closing termination of real estate sales and could lead to state-imposed penalties. That aside, the M&A process in Indiana will likely not change much due to IRPTL’s repeal. Ubiquitous are due diligence requests, environmental surveys (Phase I, Phase II and so on), representations and warranties, and indemnification clauses identifying and addressing environmental concerns. These typically duplicate IRPTL’s impact for buyers and lenders. Likewise, when appropriate, remediation covenants, discrete purchase price holdbacks or adjustments and other special provisions aimed squarely at treating known environmental issues have long been commonplace in M&A transactions involving commercial property. The biggest effects of IRPTL’s repeal on M&A transactions may only be slightly shorter closing checklists, and a new impetus for lawyers to delete outdated IRPTL references from their form documents.
Read more information on IRPTL and its repeal in the linked Bose McKinney & Evans client alert.