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Hazardous Waste Considerations in Real Estate Transactions

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Hazardous Waste Considerations in Real Estate Transactions A D e p a r t m e n t o f E c o l o g y R e p o r t Hazardous Waste Considerations In Real Estate Transactions Public awareness of also have significant hazardous waste problems contamination problems. Hazardous Waste Laws: and environmental laws has You could be potentially created both obvious and liable for the cleanup of You Could Become Liable unexpected liabilities in real hazardous substances estate transactions. To regardless of the type of In the 1980s, laws were Liability Under the minimize risk, purchasers are property you buy or lease. passed requiring identifica- Laws Is Far-Reaching advised to conduct an appro- This report is directed tion, investigation, and ❖ You do not have to be priate investigation into the toward anyone involved in cleanup of sites contami- responsible for all the history of activities and real estate transactions; nated with hazardous contamination on your business practices associated individual citizens, real substances. These laws property to be required to with a piece of property estate brokers and agents, impose potential liability on pay all or part of the cost of before buying or leasing it. appraisers, lenders, property owners, lessors, cleaning it up. lessees, and others involved Otherwise, you could be attorneys, consultants, and ❖ If you buy or lease a in the management or accepting responsibility for developers. It identifies some piece of property knowing it purchase of properties that hazardous waste contami- common concerns regarding is contaminated, or do not are contaminated and require nation caused by someone hazardous waste liability as it conduct an adequate cleanup. else and you could be relates to property environmental site assess- Most hazardous waste required to pay for cleaning transactions and outlines ment before buying or cleanups in Washington are it up. investigative techniques leasing the property, you governed by two laws: Although commercial commonly used to assess the may be found liable for and industrial properties are potential for hazardous cleanup. Federal: Comprehensive more likely to be contami- substance contamination at a Environmental liability can nated than residential or rural site. Environmental Response Compensation and Liability be costly. Before entering properties, many rural and into a purchase or lease agricultural properties can Act (CERCLA), commonly known as Superfund. agreement on property that could be contaminated, Washington State: Model Ecology recommends that Toxics Control Act you seek the advice of Caution! (MTCA), Ch.70.105D professionals experienced in This report does not, and is not intended, to state the RCW, passed by voters in conducting environmental circumstances under which liability will be imposed 1988 as Initiative 97. site assessments. The under state or federal law, nor does it establish a information contained in standard of due diligence or define appropriate this report should not be used to replace the advice inquiry for environmental site assessments. and expertise of legal or “Due Diligence” and “Appropriate Inquiry” are technical specialists who terms used to designate the nature and extent of an have proven experience environmental property assessment for a given site. with environmental To establish that a purchaser or lessee should not be site assessments. liable for cleanup costs, that person must be able to show that they investigated the property fully before its purchase or lease and in doing so did not find any contamination. If the property inspection was not conducted with “due diligence” or if the purchaser did not conduct an “appropriate inquiry”, he or she may be held liable for cleaning up the property. Ecology Report R-TC-92-115 Revised September 1999 Page 1 Why An Environmental Site Assessment Is Needed: LIABILITY An environmental site Who Is Responsible ? Hazardous Waste To meet the standard of assessment of real property ❖ Current owners or Liability Affects proof required to qualify for prior to transfer of title is not operators of facilities Financing this “innocent purchaser’s” required by Washington state ❖ Any person who owned Banks may be less willing to defense, the person must be or federal law. In Washing- or operated the facility at the lend money on property able to show that before ton state, environmental site time of disposal or release of contaminated with hazardous buying the property they assessments are being a hazardous substance substances. The property made “. .all appropriate conducted by private inquiry into the previous ❖ Any person who brought could have diminished resale individuals and companies in ownership and uses of the or caused a hazardous value or the entire value of response to the strict liability property, consistent with substance to be located at the the property could be lost. In imposed by hazardous waste good commercial or facility extreme cases, laws. contamination might make customary practice in an The buyer of a piece of effort to minimize liability.” Liability Is Strict, Joint the property unsaleable or property assumes the rights could result in a financial No person can escape and responsibilities of and Several liability by knowingly selling According to state and liability greater than the property ownership. Failure original cost of the property. contaminated property to look into the environ- federal laws, persons liable without first disclosing for sites where a release of The potential causes of mental status of property reduced market value for knowledge of the prior to its purchase will be hazardous substances has contamination to the buyer. occurred or threatens to contaminated properties interpreted to mean that the include: Nor can anyone escape buyer is willing to accept the occur are strictly, jointly, and liability who caused or ❖ Cleanup costs property “as is”. For the severally liable for the contributed to a release of a ❖ unwary buyer this could cleanup of those sites. Damage to natural hazardous substance. include the cost of cleaning Strict liability means that resources (such as wildlife) To determine if a person up contamination from liability may be assigned ❖ Liability to surrounding is an “innocent purchaser” hazardous substances. regardless of who is at fault properties and affected the courts will consider: for the release. This means individuals ❖ The specialized that if your property is ❖ The stigma attached to knowledge or experience of contaminated you may be property that was once the buyer held legally responsible for “dirty” Definition of cleaning it up even if you did ❖ The relationship of the ❖ Hazardous not cause the contamination. Difficulty in acquiring actual price paid to the value Joint and several mortgage loans or insurance of uncontaminated property Substance and liability means that each and ❖ Whether the buyer used Hazardous Waste every potentially liable Defenses to Liability? commonly known or person can be required to pay Although not easy to reasonably determined Under the Model Toxics establish, some defenses to Control Act definition, all or part of the cleanup information consistent with costs and environmental liability are provided in the good commercial or “hazardous substances” damages resulting from any Model Toxics Control Act. customary practices could be almost any Among the persons who are release. If 100 people ❖ The obviousness of the chemical or waste that not liable for a release is any brought drums of chemicals presence or likely presence person who can establish could threaten human to a dump, and hazardous of contamination at the that, at the time the facility health or the substances leaking from property environment. those drums were later found was acquired, the person had ❖ The buyer’s ability to to be a threat to human no knowledge or reason to “Hazardous substances” detect the contamination by health or the environment, all know that any hazardous include those substances appropriate inspection that are “hazardous 100 of them or any subgroup substance had been released at the site. The burden of The courts may hold the wstes.” of them could be required to pay for cleanup. proof lies with the purchaser. buyers of industrial or However, for the commercial property to purpose of this document higher standards of review these terms are used than persons buying interchangeably. residential property. Page 2 Revised September 1999 Ecology Report R-TC-92-115 Environmental Site Assessments A thorough environmental What Is An But don’t be deceived by the You Must Be Thorough! site assessment can minimize Environmental Site size of the property, its Environmental site assess- potential liability under the Assessment? location or use. A few 55- ments contain several Model Toxics Control Act. An environmental site gallon drums of chemicals common elements, including Since one of the primary assessment evaluates the can be stored anywhere, and a site history, comprehensive defenses to liability is the historical uses and they can contaminate thou- review of records, inter- “innocent purchaser” succession of owners or sands of gallons of ground views, and a physical site defense, you must be able to occupants of a site. It helps water and/or hundreds of inspection. Soil and water show that you looked into to identify the possibility that cubic yards of soil. sampling will be needed if the previous ownership and past practices at and around Due to the unique any of the other investigative uses of the property the property have left it history and circumstances methods
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