NJDEP Discontinues ISRA Letters of Non-Applicability

April 16, 2008
Client Alert Newsletter May 2008

The New Jersey Department of Environmental Protection ("NJDEP") recently announced that effective April 30, 2008, it will no longer issue applicability determinations (commonly referred to as letters of non-applicability or "LNAs") with respect to the Industrial Site Recovery Act ("ISRA"). ISRA is the New Jersey law that requires, with some exceptions, a company to go through an environmental clearance process as a condition to the sale, transfer, or cessation of operations of an industrial establishment (as determined by the facility's SIC or NAICS code) that handles hazardous substances. The complexity of certain transactions or business operations that were difficult to categorize using the NAICS or SIC system frequently raised issues as to whether the transaction was one to which ISRA applied.

For many years, NJDEP had issued LNAs as a service to the regulated community so that the parties engaging in a transaction could take some comfort that the agency had concluded that their transaction or business operations were not subject to ISRA. As a consequence, a requirement to secure an ISRA LNA has often been a condition of purchase agreements or loan commitments and is frequently a standard term in leases. As these will no longer be available, the real estate community will have to adjust its expectations to reflect NJDEP's current practice.