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Those who deal with waste often witness that the discovery of contamination on real estate is the kiss of death for a land acquisition or development project. The label "hazardous waste" can spook buyers, sellers, banks, investors, landlords, tenants, and brokers. Government agencies which acquire property by purchase, eminent domain, condemnation, tax title, gift, or otherwise, get cold feet when waste is found before the purchase and sale. Developers disappear from the landscape when they see signs of hazardous waste. Business expansions are cancelled for the fear of disturbing past contamination. Updated September 2018.

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INTRODUCTION

Those who deal with waste often witness that the discovery of contamination on real estate is the kiss of death for a land acquisition or development project.

The label "hazardous waste" can spook buyers, sellers, banks, investors, landlords, tenants, and brokers. Government agencies which acquire property by purchase, eminent domain, condemnation, tax title, gift, or otherwise, get cold feet when waste is found before the purchase and sale. Developers disappear from the landscape when they see signs of hazardous waste. Business expansions are cancelled for the fear of disturbing past contamination.

This fear of liability is natural, considering that innocent landowners can be liable for acquiring contaminated land even if they were not aware of the contamination at the time of acquisition. Sellers can remain liable even if they sell their land "as is" to buyers who agree to "assume the risk." Facility operators can remain liable long after sale, even if they have contracts for what they think is "complete and total indemnification." Waste generators and transporters can remain liable for their waste forever, wherever it might be deposited, even if they acted properly and obeyed the laws. Owners and operators of hazardous waste treatment, storage and disposal facilities (TSDFs) can remain liable regardless of whether they used the best technology at the time and were not negligent in TSDF management.

Real estate contamination incites fear because it can trigger what is called "strict, joint, and several liability" under federal and state Superfund laws, and impose it retroactively and prospectively.

We believe, though, that most hazardous waste problems are manageable, if only someone will take charge to manage them. The parties to a transaction can understand their legal liabilities and the applicable procedures for cleanup. They can get reliable estimates of cleanup costs and schedules. They can allocate their financial responsibilities and cleanup duties using carefully crafted real estate documents. They can readily find ways to "hold the deal together." They can preserve the evidence they need to submit insurance claims and go after the real responsible parties for reimbursement.

This approach can work for the simplest transactions or projects to the most complex, to put contaminated properties back into productive use. While many contaminated lands, commonly known as brownfields, are located in prime urban and commercial locations, they have remained abandoned or ignored for several reasons. One is that developers elect to build on comparatively pristine land elsewhere, commonly called greenfields, often in suburban or exurban areas. Similarly, lenders have been reluctant to finance projects that may involve the risk of environmental liability.

There are parties willing to redevelop brownfields and finance that redevelopment, but they are not willing to face exposure to liability for exorbitant cleanup costs as potentially responsible parties (PRPs) under the federal; and state Superfund laws just by dint of becoming site owners or operators.

The slightest mention of contamination should not create unreasonable fear. Handled properly, the presence of contamination need not render property unusable or unsellable. It is very possible to buy and sell dirty property, complete development projects, or continue business operations.

 

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