Document NEGe9wNEDGvbda1GE7q7aj2DQ

FROM THE DESK OF April 8, 1987 TO: J. ff. Wolter Interesting article from "Building Operating Management". Especially study information on last page. Those studies may help sales people. Attachment Bill 10003364 t critical safety issues i l by WILLIAM McFARREN An Owner Primer on Asbestos Awareness Precautiomry measures necessary to protect against increased liability, higher insurance rates and a decrease in the market value of a given property he increased pubK lie awareness of Q. the asbestos is sue in the last few years has made it imperative for building owners to understand the asbestos situa tion in their buildings in order to protect themselves from in creased liability exposure, in creased insurance rates, and de crease in the market value of their property. Although asbestos has long been known as a health hazard, it was not until 1973 that the first regulations against its use in the construction of buildings were is sued by the EPA. These regula tions were revised in 1975 and 1978 so that the use of asbestoscontaining material (ACM) in con struction was phased out by 1978. It must be kept in mind that ACM in a pre-1976 building does not necessarily pose a health threat, especially if the material is in good condition. But even where the ACM poses no health risk, its presence in a building can be se rious financial threat to the owner. t c 1 f l t t i 1 1 Left photo: Workers removing asbestos fireproofing in a San Francisco high-rise office building. 10003365 William McFarren is director of marketing for E.C.U. Inc., Oakland, CA. and tenant-landlord rotations It is common practice in current ! leasing arrangements that costs | for maintaining and operating a | building are "passed through" to { the tenants. Since an asbestos j abatement program is more costly i than normal maintenance and is | usually not something the tenant bargained for when agreeing to the "pass-through" clause in the | lease, the tenant will not accept ' this cost. If it goes to arbitration j or litigation the tendency is for I the tenant to win. ; What is of greater concern to landlord than losing on the "pass-through" issue is the pos sibility that the tenant can termi, nate the lease when the presence ef^ACM becomes known.. This can j be done through the "qai&fr-enjoy{ ment" clause or clauses which eni sure that the building will be | properly maintained. In addition ] to this, the long-term tenant's right to remodel could bring to fbear EPA and local regulations (dealing with renovation. This could effect the entire building and cause greater cost to the land! lord and problems with other ten ants. The landlord would probably have little success in refusing ap proval of a tenant's remodeling plans on the basis of asbestos, as it would once again be something the tenant had not bargained for. The indemnity clause in a lease can also be of significant concern, j The landlord may be held par- j tially or wholly liable for asbestos| related claims brought by tenI ants, tenants' employees or busi ness guests of tenants. Although this may be a future possibility, it is a concern that cautious build ing owners should address now. Asbestos and the commercial real estate market Since the asbestos issue has re ceived a large amount of atten tion, it is unlikely that the seller could successfully claim igno rance if the buyer brings suit re quiring remedial treatment for an after-sale discovery of ACM in a building. It is becoming common for an asbestos report to be re quired in presale disclosure state ments. Another current trend is for the purchaser to put an "asbestos-/ free" clause in the sales contract. If the seller fails to disclose infor mation about the asbestos in a building, he may be liable for fu ture claims made by tenants against the new owner. What is of the most pressing concern to owners of buildings found to contain asbestos is the abrupt decrease in the market value and the possibility that the property may be unsalable. The seriousness of this issue can be seen in the fact that Prudential, Aetna and Metropolitan have in ternal policies against consider ing any direct investments in buildings with ACM, or even mak ing loans secured by such prop erty. Another example of harsh mar ket consequences for buildings containing asbestos was the Arco Center in Los Angeles where the sale price had to be drastically discounted -- and the building still remained difficult to sell. Solutions to the asbestos dilemma The first thing owners and managers of older (pre-1976) buildings should do to protect their investments is to dispel?' their own ignorance of the asbes-' f tos issue in general, and the sifua- " tion in their building in particu- ( lar. A good place to start is with the local office ofthe Environmen tal Protection Agency and the lo cal Air Quality Management Dis trict. They can provide informa tion about asbestos and the names of qualified professionals who can assist in surveying prop erty for asbestos. It is quite often the case that by having a thor ough survey and abatement plan available, the salability of the building can be preserved. If significant amounts of ACM are found which decrease the building's value it may prove to be cost-effective to remove the asbes tos. Although this can be costly, it is likely to be considerably less than the overall loss of market value. This is especially true when abatement work is con ducted as part of a general reno vation program. If it is decided that abatement work is necessary, the owner Bhould make his choice of who is to perform this work based on a critical examination of the con- 10003366 (continued on page 102) BUILDING OPERATING MANAGEMENT 99 THE ASBESTOS ISSUE Check contractor insurance coverage -- an issue that has been a problem for the asbestos abatement industry (continued from page 99) tractor's qualifications and refer ences. An owner should choose a contractor in the same way as he would for any major project ... with only a few exceptions. When inquiring about the con tractor's insurance, it is impor tant to realize that general lia bility insurance does not fully cover asbestos-related claims. The contractor should be able to pro vide asbestos insurance for the project. Insurance has long been a problem for the asbestos abate ment industry, and the owner Bhould be clear on what the con tractor's insurance'Wvers. "Claims made" insurance only covers those claims which are made while the policy is in force. Since many such claims are made several years after the actual work was done, the "claims made" policy will probably have lapsed. "Occurrence" insurance covers any incident which occurs while the insurance is in force even if the claim is made years later when those concerned may be in sured by some other company. It is extremely important that the contract is dear on what it is that needs to be done, the sched ule for completion, and any other details which may affect the work. This will ensure a thorough abatement project with a mini mum of problems for both the owner and the contractor. In condusion, today's building owners and managers need to in form themselves on their particular asbestos situation, carefully look at their leasing and sales agreements as they may relate to ACM in then- building, conduct a survey, and pre pare an asbestos maintenance or abatement plan -- and only pro ceed with abatement work with fully qualified asbestos abatement contractors. na Study. Qualifies Asbestos Health c Stwfies'conducted'ln GreatBrttafiJ $*ind Canada piuvide'additionail ^scientific support for the i" '" that'asbestos i 'measurable airborne'asbedos I j&The' study comparedairboinei^ ^concentrations of asbestos'in 39-S g-buildings containing'asbestos^^ "materials' with concentrations hi* .outside air and building fbest'rrurteria^fer^ tcomameo spra/eoasi teittlgautl^F SgSfform? reliable measurement technique -- ^the study fotmd thatjiiostof thefibersj ^present were not asbestos and tiiaf? ' asbestos levejs in building air were ii ' very low Iheanalysis also showed?-^ ^that asbestos^levels In thesejj^^g^ commerdaTand residentialstriicturesi [levels i _ _ fwithout!__________ __ rproducts^wCaSoiSwim'Sbttm thadbeen.removed years r~ [condition? i m %EaMBve'M<rim Department ( Environment finds^tnat asbestos) materials In buildings^ even^whenj \there'is forced air"drculation'~-i* Esourcesj.--.___ __ rrtadW^ierj; [occup _ ^Usingtransmissiorreji [microscopy jTEM) ana|y5gc^a highR j some maintenance'!.___ . fe'conduslon*confirrren5iiiyrfj omw stodies"pfevjo^$*published1tg [the U.IC and Cariad" 102 APRIL 1987 IOOO3347ft