ISRA NJ Compliance: What You Want to Know
January 02, 2025

Developing property in New Jersey? You should know about ISRA.

The Industrial Site Recovery Act (ISRA) is a crucial piece of environmental legislation that affects many property transactions in the Garden State. As a developer, understanding ISRA is essential to avoid costly surprises and ensure your projects stay on track.

Why ISRA Matters to You

The goal of ISRA is to identify and clean up contaminated industrial sites before the current property owner/ operator sells the property without addressing environmental concerns that resulted from the industrial operations onsite. So, while you as the property developer is not responsible for the investigation or remediation of the property, ISRA may apply and require the property owner/ operator to complete the remediation prior to the transaction. If you are developing or transacting property in New Jersey, you need to determine if ISRA applies to your site.

Here's why you should care:

• ISRA compliance is legally required for many property transactions, triggering events include:
  • Sale of property
  • Sale of business
  • Transfer of ownership or operations
  • Cessation of operations
  • Some corporate reorganizations
• Non-compliance can lead to hefty fines for the current operator and property owner and project delays for the developer; and
• Understanding ISRA helps you budget accurately and plan realistic timelines to allow for remediation

Your Guide to ISRA Compliance

This post will walk you through the essentials of ISRA compliance. We'll cover:

• The basics of ISRA and who it affects
• A step-by-step guide to the compliance process
• Key considerations for property developers
• How to navigate ISRA's nuances

By the end, you'll have a clear roadmap for tackling ISRA requirements in your next New Jersey development project. Let's dive in!

Understanding the Basics of ISRA

ISRA stands for the Industrial Site Recovery Act. It's a New Jersey law designed to protect public health and the environment and the requirements of ISRA are triggered when there is a sale or transfer of ownership of an industrial property, the industrial operations cease, there is a bankruptcy or foreclosure, or there is a lease termination. In simple terms, ISRA ensures that industrial sites are properly investigated and cleaned up before they change hands or shut down. Industrial sites are those operations that carry relevant North American Industry Classification System (NAICS) codes.

Key Players in the ISRA Process

• New Jersey Department of Environmental Protection (NJDEP): Oversees the ISRA program
• Property owners and/or Operators: Responsible for complying with ISRA requirements
• Licensed Site Remediation Professionals (LSRPs): Certified experts who guide the compliance process
• Buyers and Sellers of Industrial Properties: Need to understand and factor ISRA into project plans

The Risks of Non-Compliance

Ignoring ISRA can have serious consequences:

Environmental Risks:

• Continued contamination of soil and groundwater
• Potential health hazards for future occupants

Financial Risks:

• Hefty fines from NJDEP
• Unexpected remediation costs
• Project delays and lost revenue
• Difficulty securing financing or insurance

Legal Risks:

• Violations can void property transactions
• Potential lawsuits from buyers or tenants

Why ISRA Matters for Your Bottom Line

Understanding ISRA isn't just about compliance—it's about protecting your investment. By factoring ISRA into your due diligence and project planning, you can:

• Accurately assess property values
• Create realistic development timelines
• Avoid costly surprises and delays

Remember: ISRA compliance isn't optional. It's a crucial part of doing business in New Jersey's real estate market. In the next section, we'll break down the ISRA compliance process step-by-step, so you know exactly what to expect.

ISRA Compliance Process: A Step-by-Step Guide for Property Developers

Navigating ISRA doesn't have to be a headache. Here's a clear roadmap of the process:

1 – Determine Applicability

While current owner / operator is required to address the ISRA requirements, it is important to assess ISRA applicability during due diligence to ensure that the current owner is complying with or intends to comply with the ISRA.

2 – Preliminary Assessment (PA)

A PA is a comprehensive review of the property's history and current conditions to determine if there may be environmental impacts due to industrial operations. The PA is completed by the current owner with the assistance and oversight of a Licensed Site Remediation Professional (LSRP). the PA identifies areas that require investigation and or remediation. These areas are called Areas of Concern (AOC).

3 – Site Investigation (SI) (If Required Based on the PA)

A SI plan is developed to investigate the AOCs that are identified in the PA and is intended to determine whether a discharge or release has occurred relative to any of the AOCs. The SI could consist of additional document review, non-intrusive studies (i.e., ground penetrating radar, etc.) or soil or groundwater sampling. Upon completing the SI, it should be understood if additional investigation or remediation is needed.

4 – Remedial Investigation (RI) (If Required Based on the SI)

In the event the SI does determine that the site has been adversely impacted by the industrial operations, further sampling is required to delineate the extent of the contamination, determine risks to the environment and human health and develop an appropriate remedial action plan.

5 – Remedial Action (RA) (If Required Based on the PA/SI)

Once the contamination has been delineated and a remedy selected, the remedy must be implemented before the case can be closed and the ISRA transaction and requirements completed. Because there is a wide variety of remedies that can be selected, with varying implementation timeframes, the RA phase will be critical to determine the impacts on the overall project timeline.

6 – Response Action Outcome (RAO)

The RAO for an ISRA case, like all site remediation cases in NJ, represents the case finish line. The RAO is issued by the case LSRP once all the necessary investigation and remediation is complete. This document declares the remediation complete, the ISRA requirements satisfied, and allows for the property transaction to proceed.

7 – Alternate Means of Compliance

It should be noted that there are mechanisms that will facilitate the property transaction prior to completion of the remediation. One example is to establish a Remediation Certification and Remediation Funding Source. This process allows the current property owner / operator to certify that the remediation will be completed, despite ownership, and requires a financial mechanism to fund the future remediation. There are other compliance options such as De-minimis Quantity Exemption, Certificate of Limited Conveyance, Regulated Underground Storage Tank Only Waiver, and Remediation in Progress Waiver.

Conclusion: Mastering ISRA for Development Success

Let's recap the key points every New Jersey developer should remember about ISRA:

ISRA Is More Than Just Red Tape

• ISRA requirements are satisfied by the current owner/operator, not the purchaser or developer
• It's a crucial step in protecting your investment and the environment
• Compliance is mandatory for many industrial and some commercial properties
• Ignoring ISRA can lead to severe financial and legal consequences

Knowledge Is Power

• Understanding the ISRA process helps you plan better and avoid surprises
• Each step—from Preliminary Assessment to Response Action Outcome—has its own challenges and opportunities
• Familiarity with exemptions and waivers can save you time and money

The Bottom Line

ISRA compliance might seem daunting, but it's a manageable process with the right approach. By understanding its requirements, planning carefully, and working with experienced professionals, you will have the best chance for a positive outcome and successful development.

Remember: In the world of New Jersey real estate development, ISRA knowledge isn't just helpful—it's essential. Stay informed, stay prepared, and you'll stay ahead in this competitive market.

Is your next property acquisition or development project subject to ISRA? Contact SESI today and see how we can help.