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Erin Phalon
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Keith B. Walker
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Environmental

Real Estate

Sign of the Times:  New Prop. 65 Warning Requirements Take Effect

By: Keith B. Walker and Erin K. Phalon

If you are a real estate landowner, developer, property manager or tenant doing business in the State of California, new regulations that took effect on August 30, 2018, will create new burdens on your business.  California’s Safe Drinking Water and Toxic Enforcement Act of 1986 – commonly known as “Prop. 65” – is back in a more potent form, with significant financial penalties for non-compliance.

Under Prop. 65, businesses with ten or more employees (regardless of where stationed) have to provide “clear and reasonable” warnings prior to exposing anyone (e.g., employees, tenants, guests, contractors, and delivery personnel) to any of the approximately 900 chemicals listed by California as carcinogens and reproductive toxins.  Civil penalties can amount to as much as $2,500 per day per violation.  Further, Prop. 65 can be enforced by private parties purporting to act in the public interest.  The resulting regulatory scheme has incentivized numerous private parties, and their counsel, to extract lucrative settlements from a wide variety of defendants on a large-scale basis for even the most trivial of variations from Prop. 65’s specific warning requirements.  Quite often, enforcement of Prop. 65 is wholly unrelated to any actual public interest. 

 

What are the most prevalent chemicals of concern in a real estate setting?

For most buildings, even those constructed relatively recently, the most common carcinogens and reproductive toxins are asbestos in building materials; formaldehyde resin, asbestos, arsenic, cadmium and creosote in materials used in walls, floors, ceilings and outside cladding; formaldehyde and lead in furniture, foams, vinyl, brass keys, electrical power cords, carpeting, carpet padding, carpet glue, wall coverings and wood surfaces; vinyl chloride monomer, benzene and ceramic fibers in roofing materials; lead and crystalline silica in paints and painted surfaces; and benzene, carbon monoxide and diesel exhaust in underground parking areas and loading bays.  Other carcinogens and reproductive toxins are also often present in cleaning and maintenance products, including those used in swimming pools and spas; products used for pest control and landscaping; and, in a hospitality setting, food and beverages.

 

What has changed?

For nearly all signage required by Prop. 65, the language that must appear in the warnings has been augmented.  In addition, for environmental exposures related to buildings or outdoor spaces with clearly defined entrances, specific new requirements apply to hotels (including motels, bed & breakfast inns, reports, spas, condominiums and extended stay establishments) and to restaurants, including in regard to the food and beverages they serve.  Additional new warning requirements apply to specified areas such as enclosed parking facilities, service station and vehicle repair facilities, and designated smoking areas.  New requirements also apply with respect to occupational exposures, such as in an industrial or manufacturing setting.   

 

What are examples of the new changes to the warning language?

Although the prior specific warning requirements varied by area of concern and nature of the facility, businesses operating under the previous iteration of Prop. 65 could generally satisfy their notification obligations with signage, or labeling (in the context of retail services), stating that the area or product of concern contained a chemical known to the State of California to cause cancer and/or birth defects or other reproductive harm.  In contrast, the new regulations require providing information regarding one or more specific chemicals at issue, the nature of the prospective harm caused by the chemical (i.e., as a carcinogen, reproductive toxin or both), and the source or sources of the chemicals at issue.  

The new regulations also provide a higher degree of specificity regarding the placement of signage, the size of the font that must appear (no smaller than 72-point), and the languages in which the warnings must appear (English and any others used on signage in the affected area).  In addition to the general warnings outlined above, exact warning language is required for certain specified exposures.  

 

Next Steps

Due to the significant penalties and broad enforcement powers associated with Prop. 65, which create a potential revenue stream for incentivized private individuals, it is important for businesses to understand the new Prop. 65 requirements and comply with them as soon as possible.  In addition, consideration should be given to whether the burden of compliance can be shifted to third parties, such as tenants and contractors.

Cox, Castle & Nicholson LLP can provide valuable guidance regarding compliance with the new requirements under Prop. 65.  If you have any questions concerning the subject of this article, please contact any member of our environmental practice group.

 

Keith Walker - kwalker@coxcastle.com

Erin Phalon - ephalon@coxcastle.com

Preston Brooks - pbrooks@coxcastle.com

Perry Hughes - phughes@coxcastle.com

David Waite - dwaite@coxcastle.com

Robert Doty - rdoty@coxcastle.com

Robert Infelise - rinfelise@coxcastle.com

Cox, Castle & Nicholson LLP is a full service law firm offering comprehensive legal services to the business community and specialized services for the real estate and construction industries.  Reproduction is prohibited without written permission from the publisher.  The publisher is not engaged in rendering legal, investment, business or insurance counseling through this publication.  No statement is to be construed as legal, investment, business or insurance advice.

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