A Multifamily Guide to Vapor Intrusion

This environmental issue not only creates new liability risks but also leads to financing and transactional challenges, according to Wyatt Kendall and Brian Remler of Morris, Manning & Martin.
Wyatt Kendall

Every multifamily investor and developer should be aware of regulators’ increased focus on vapor intrusion and how this scrutiny impacts underwriting, management and development of multifamily properties.

Without a firm understanding of vapor intrusion risks and sound strategies to address them, investors and developers may find themselves facing unexpected liability, having development plans delayed and complicated and/or losing out on potential deals.

Vapor intrusion occurs when chemicals (such as solvents and gasoline products) are released to soil and/or groundwater and then volatize to emit vapors that migrate upward into the buildings. The U.S. Environmental Protection Agency and many state environmental agencies have determined that vapors can present an indoor air health risk and have established corresponding screening standards and cleanup requirements.

This emerging environmental issue not only creates new liability risks for multifamily investors and developers but also often leads to financing and transactional challenges for buyers and lenders.

Many sites targeted for multifamily investment and development are located in areas with histories of commercial and industrial operations, including manufacturing plants, dry cleaners, and gas stations. Such operations often use chemicals known as volatile organic compounds.

When spilled or leaked into the ground, VOCs can volatize into vapor, which can then travel paths of least resistance (so-called “preferential pathways”)—such as utility corridors and cracks in building slabs—and enter overlying buildings. The most common VOCs are petroleum constituents (found at gas stations) and tetrachloroethylene (a chlorinated solvent used in dry cleaning, auto repair and manufacturing).

The rising importance of vapor intrusion

Historically, regulatory agencies focused on ensuring that cleanup standards were met with regard to soil and groundwater. They did not begin earnestly discussing vapor intrusion risks until the 1990s and it was not until 2002 that the EPA issued its first draft guidance.

Brian Remler

By the mid-2010s, the EPA for the first time formally adopted guidance documents concerning vapor intrusion and many state agencies soon followed suit.

The EPA guidance specifically outlined protocols for sampling, conducting risk assessments and implementing vapor mitigation measures when necessary. It also included a specific vapor intrusion screening level calculator as a tool to determine when specific contaminant concentrations present an unacceptable indoor air risk to building occupants.

Most significantly, the regulatory community’s heightened focus on vapor intrusion led to the revision to the standard for performing Phase I environmental site assessments. Environmental consultants are now required to evaluate potential vapor intrusion risks as part of Phase I. This alone has had widespread impacts on real estate underwriting and lending.

As environmental consultants increasingly identify vapor intrusion issues in Phase I, buyers and lenders now, in turn, require a more substantial vapor intrusion analysis. Many sites that received “clean” Phase I before the standard changed may also now confront lingering risks that were not previously identified.

Do I have a vapor intrusion issue?

Evaluating vapor risk is a multistep technical process, typically requiring an environmental consultant. The consultant first identifies historic or current operations at or near the property that may have used VOCs, and whether they create a potential vapor risk.

If a potential risk exists, the consultant conducts groundwater and/or soil vapor sampling (or uses existing data, if it exists) and compares the results to regulatory screening levels. This initial screening is generally very conservative; it is used solely to determine if further assessment and/or mitigation is required.

If sampling results exceed applicable screening levels, one common approach is to conduct a site-specific modeling analysis. Vapor models are generally designed to estimate indoor air concentrations based on concentrations detected in subslab soil vapor or groundwater and to evaluate risks based on those estimates. Most models can be adjusted for site-specific factors such as:

  • Soil types, which can affect the rate of vapor migration;
  • Characteristics of the overlying building such as slab thickness and ceiling heights;
  • The likely frequency and duration of potential exposure.

Vapor models, generally recognized as appropriate by most regulators, can only provide estimates of potential risks. A current or future vapor intrusion risk may actually exist despite a conclusion to the contrary.

Indoor air sampling is another approach. While collecting indoor air samples generally eliminates the need for modeling, it has disadvantages. It may detect VOCs from chemicals and cleaning supplies used in the ordinary course of operations, potentially causing “false positives” or uncertainty as to whether the detections actually result from underlying conditions.

Further, it only provides a “snap shot” of indoor air quality at the specific time of testing. As the community ages, it may fail to identify that future risk that could manifest from significant concentrations of VOCs beneath the slab. Finally, it requires access to the units, which can lead to residents questioning the reason for the testing.

How do I mitigate it?

If a potential vapor risk is identified, there are several potential mitigation approaches. The most obvious is to remediate the vapor’s source in soil and/or groundwater. Several factors may render this approach impractical, such as the presence of overlying buildings, tight redevelopment schedules or vapor originating from an off-site source.

The most common approach for new developments is to install vapor barriers and/or a passive venting system. Vapor barriers are generally 40 to 60 millimeters thick and specifically designed to block and withstand corrosion of VOCs. Often, a subslab venting system is also installed. Venting systems typically include networks of horizontal subslab pipes connected to vertical pipes that direct captured subslab vapors above the roofline.

Mitigation systems can be active (using motorized fans) or passive (using a wind-driven turbine). Another option is to design the community so occupied spaces sit above ventilated parking. Building codes generally require that parking garages have more ventilation and air exchange systems separate from the adjoining building.

Developers of new communities should consider proactively installing vapor barriers and/or venting systems—even if mitigation is not necessarily required by a regulatory agency at that time. Federal and state vapor standards are constantly being updated as more health-related information becomes available. 

This creates the possibility that an acceptable risk today may be unacceptable in the future. It is much more difficult and intrusive to implement mitigation once a community is finished and occupied.

Mitigation options at existing communities are more limited and expensive and their installation can be fraught with potential resident issues. One option is to install a subslab depressurization system beneath the foundation (which requires digging into the slab).

Depending on the building size, the foundation type and the nature of the soil, it may be difficult to install an effective system. And because of the intrusive nature of this option, it often also requires interactions with residents and resident relocations.

Another option for existing communities is to seal cracks in the slab and gaps around utility lines and modify the existing HVAC system to increase positive pressure/ventilation. This approach often also includes placing carbon air filters/purification devices within the buildings.

While it’s cheaper and less intrusive than a subslab depressurization system, it is often temporary and less effective and requires control of the air exchange rate and regular filter replacements, which can create challenges in occupied spaces.

Vapor intrusion risks have become a key environmental issue in multifamily transactions. Because of increased regulatory scrutiny and the change in the Phase I standard, multifamily buyers and lenders have become more keenly aware of the challenges and risks presented by vapor intrusion. Consequently, sound and proactive measures to investigate and mitigate vapor intrusion are—and will continue to be—more important than ever.

This article is for informational purposes only and is not intended as legal advice.

Wyatt Kendall and Brian Remler are attorneys at Morris, Manning & Martin LLP in Atlanta. Kendall is a partner in the Environmental, Infrastructure and Land Use Practice. Remler is an associate in the environmental, infrastructure and land use practice.