By Susan C. Karp, Of Counsel, Murphy Schiller & Wilkes LLP
What Happened
On November 17, the New Jersey Department of Environmental Protection (NJDEP) adopted amendments to rules implementing the Site Remediation Reform Act (SRRA). In the face of sustained opposition from both the regulated community and the Legislature, NJDEP removed a controversial provision that would have imposed a new reporting obligation tied to environmental due diligence. At the very same time, however, NJDEP issued a new proposal, only modestly revised, that would effectively reinstate the core concept. The public hearing on the re-proposal is scheduled for December 15, 2025 at 1:00 p.m., with the public comment period currently slated to close on January 16, 2026.
Why It Matters
New Jersey’s environmental liability framework, principally under SRRA and the Spill Compensation and Control Act, already imposes strict, and often joint and several, liability on owners of contaminated property, even if those owners did not cause the contamination. Remediation costs can easily reach into the millions of dollars. Against that backdrop, sellers have long had to balance the benefits of a sale process against the risk that a prospective buyer’s investigation will surface conditions that could trigger obligations for the owner. In practice, the market has managed this risk through negotiated access and confidentiality protections, enabling buyers to conduct due diligence and, ultimately, enabling contaminated sites to change hands and be remediated and redeveloped by private parties.
New Jersey law does not currently impose a duty on buyers (or their consultants) to report contamination identified during due diligence to NJDEP. The re-proposed rule would not require direct reporting to NJDEP, but it would require disclosure of identified contamination to the seller. As a practical matter, that disclosure would immediately place the seller on notice and would trigger the seller’s obligation to report to NJDEP and undertake remediation. If a transaction does not close, the resulting cleanup obligation could be financially devastating for the owner. Predictably, this dynamic may chill marketing of properties and, in some cases, lead sellers to resist or prohibit sampling during due diligence – outcomes that would frustrate cleanup and redevelopment.
What Has Changed (and What Hasn’t)
Although NJDEP has adjusted the structure so that the obligation runs to the seller rather than directly to the agency, the market impact is largely the same: parties engaged in due diligence would face a new, mandatory disclosure requirement that materially alters risk allocation in real estate transactions. That shift will affect how access agreements, purchase and sale agreements, and consultant scopes of work are drafted, negotiated, and executed. It also raises questions regarding privilege, confidentiality, and the handling of draft data, preliminary findings, and opinions – issues that will require careful navigation.
Timing and Implementation Risk
The compressed timeframe for this re-proposal is noteworthy. With only a short window between the hearing and the comment deadline, the effective date of any final rule will depend on how the incoming Sherrill Administration evaluates and acts on NJDEP’s proposal, and on any litigation that may follow. If adopted as proposed, the disclosure obligation would apply to current transactions and could be triggered under existing sale contracts. Parties with deals underway should therefore assess whether their documents and due diligence protocols adequately address the potential rule.
Practical Considerations for Ongoing and Planned Transactions
Parties should evaluate transaction documents now to ensure they are positioned for either outcome – adoption or withdrawal of the re-proposed rule. In particular, agreements should be reviewed for provisions addressing access and sampling rights, allocation of responsibility for reporting and remediation, treatment and sharing of data and work product, confidentiality and privilege, and walk-away rights if disclosure obligations are triggered. Where appropriate, parties may also consider sequencing diligence steps to manage risk without compromising environmental integrity or regulatory compliance.
Looking Ahead
The stakes are significant. A rule that effectively mandates disclosure of due diligence findings, whether to NJDEP directly or indirectly through a seller, will reshape risk allocation in New Jersey real estate and could slow the very private investment that drives cleanup and redevelopment of contaminated sites. Stakeholders with interests in the state’s property markets should consider submitting comments by the January 16, 2026 deadline and should plan for multiple scenarios as the regulatory and political processes unfold.
(This alert is for informational purposes only and does not constitute legal advice. Parties should consult counsel regarding the implications of the re-proposed rule for their specific transactions and portfolios.)
About the Author
Susan C. Karp is Of Counsel in MSW’s Environmental Practice Group and the founding principal of Karp Environmental Law, LLC. She counsels developers, buyers, sellers, owners, operators, and lenders nationwide on environmental issues arising in corporate and real estate transactions and regulatory matters, including due diligence, evaluation of environmental conditions and liabilities, remedial options and cost estimates, and strategies for remediation cost recovery through federal and state financial incentive programs and general liability and pollution legal liability insurance. Chambers USA notes that she is “well versed in advising on the environmental issues arising from commercial and corporate transactions as well as compliance matters,” with clients describing her as “very astute, smart and capable” and “very easy to work with.” Susan serves on NAIOP’s Regulatory Affairs Committee and is a Director of the New Jersey State Bar Association’s Business Law Section, and she is a past president of CREW New Jersey. She is admitted in New Jersey and New York.
