The Clock Runs Out on NJDEP Proposal to Require Pre-Closing Reporting of Phase II Sampling Results
Many in New Jersey’s commercial real estate community are breathing a sigh of relief after the New Jersey Department of Environmental Protection (“NJDEP”) failed to adopt a recently proposed rule by its April 2026 deadline. As a result, the proposed rule expired by operation of law and did not take effect. That means, for now, it is business as usual for environmental diligence in connection with property sales.
About a year and a half ago, NJDEP surprised the regulated community when it proposed a new rule that would have required reporting certain Phase II due diligence sampling results to NJDEP before closing—a significant change to how environmental diligence would play out in transactions and a notable departure from long-standing practice. Additional details are available in our blog from last year.
Historically, the long-standing practice allows buyers to conduct environmental due diligence, including Phase II sampling, to better understand site conditions and obtain critical data to underwrite their redevelopment plans and fund any necessary remediation, all without any obligation to report the results to NJDEP or even to the property owner. The proposed rule would have altered that dynamic by triggering reporting obligations mid‑transaction, exposing property owners to unnecessary liability and market risk, and creating uncertainty around how deals would be structured.
Many real estate developers raised broader concerns about the potential impact on commercial real estate activity and, in particular, on the pace of brownfield redevelopment, which has shown to be an important mechanism for addressing historical contamination and returning underutilized properties to productive use.
Looking ahead, if NJDEP chooses to revisit this concept, it would need to initiate a new rulemaking process, including publication of a proposal, a public comment period, and administrative review. That process typically takes at least a year and would provide stakeholders with an opportunity to evaluate and weigh in on any future proposal.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication. No aspect of this advertisement has been approved by the highest court in any state.
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