No Further Action Letters Are Becoming Unicorns—Does It Matter?

In California, environmental regulatory agencies such as the Department of Toxic Substances Control (DTSC) and Regional Water Quality Control Boards have historically issued “No Further Action” (NFA) or “closure” letters to confirm that a site has been sufficiently investigated and/or remediated to meet the agency’s standards. These letters serve as formal indications that, at the time of issuance, no additional remediation or regulatory action is required—either for the property as a whole or for a specific environmental medium.

However, despite their seemingly conclusive language, NFA letters do not guarantee finality. Regulatory agencies retain the authority to reopen cases, sometimes decades later, if new information surfaces or if environmental standards evolve. In this context, NFA letters have become increasingly scarce, raising important considerations for those involved in property investment, financing, and redevelopment.

Why NFA Letters Matter in Real Estate Transactions

NFA and closure letters have long played a vital role in commercial and industrial real estate transactions. Property owners, buyers, developers, and lenders have relied on them as a measure of environmental certainty—offering reassurance that potential liabilities and future cleanup costs have been addressed. The absence of such a letter, however, does not necessarily indicate contamination or non-compliance. It may result from administrative backlog, incomplete documentation, or shifting regulatory criteria.

Nonetheless, this nuance is not always understood. A missing NFA or closure letter can create significant uncertainty, often complicating property sales, delaying financing decisions, and discouraging redevelopment. The key takeaway is that the absence of an NFA letter should not automatically be interpreted as an indication of unresolved environmental risk—but it frequently is.

A Regulatory Shift Toward Caution

Regulatory agencies are increasingly reluctant to issue final closure letters. This change is driven by a growing recognition of long-term environmental risks, the emergence of new contaminants, and a broader regulatory goal of retaining oversight. In particular, there is heightened concern that closure determinations made under past standards—especially for commercial and light industrial properties—may not align with current public health or environmental protection objectives.

As a result, agencies are opting for alternatives such as conditional closure letters, which may impose ongoing obligations like groundwater monitoring, land use restrictions, or engineering controls. This trend is most pronounced in Southern California, where regulatory bodies have adopted more conservative approaches. While some agencies in Northern California still issue NFA letters under specific circumstances, the overall trajectory is toward greater scrutiny and longer-term oversight.

Implications for Property Owners, Buyers, and Lenders

The shift away from definitive closure documentation has created friction in real estate markets. Purchasing or financing a property without clear regulatory closure raises questions about the adequacy of previous cleanup efforts. Many institutional lenders still require NFA or closure letters before approving financing, making the absence of such documentation a significant barrier to transactions—particularly in densely populated urban areas where contamination risks are higher.

Although some lenders have begun to accept conditional closures or site-specific risk assessments, many remain hesitant. The lack of formal closure documentation can reduce property value, complicate negotiations, and introduce a perceived risk of future remediation obligations.

Adapting to the New Normal

In response, the real estate industry has adapted by turning to alternative risk management tools. These include environmental insurance, indemnity agreements, and more comprehensive due diligence practices. Environmental consultants and legal counsel now play a critical role in helping stakeholders evaluate environmental risk and navigate regulatory uncertainties. Even properties that previously received closure letters are now subject to more rigorous historical analysis.

Stakeholders have increasingly called on state agencies to provide clearer, more consistent guidance. While the need to protect public health and the environment remains paramount, the absence of reliable closure pathways creates ambiguity that can deter investment and hinder economic development. Some industry groups have proposed a more standardized approach to closure documentation—one that balances the need for environmental stewardship with the practical realities of real estate transactions.

Final Thoughts

The decline of NFA letters reflects a broader evolution in environmental regulation. As scientific understanding deepens and public health protections become more robust, agencies are choosing caution over conclusiveness. For real estate professionals, this means navigating an increasingly complex landscape—one where finality is elusive, but careful planning and informed strategy can still lead to successful outcomes.