From
The KDDK Advantage - February/March 2008
Environmental
Liability
And the Property Trustee
Environmental
regulations under the Comprehensive Environmental Response,
Compensation, and Liability Act (or CERCLA — commonly
known as the Superfund) are unique in that one can be
held jointly or individually liable for costs and expenses
related to environmental contamination. Such provisions
have caused, and still prompt many individuals and entities
to avoid involvement in or acquisition of contaminated
sites.
Brownfields legislation
and recent amendments to CERCLA have, however, created
certain defenses and exemptions
from environmental liability situations.
For example,
lenders and property trustees (or fiduciaries) may
be exempt from liability under CERCLA “Safe Harbor”
provisions. But it should be noted that
simply holding the title of fiduciary or lender is not sufficient in and
of itself to receive this exemption. To qualify for exemption,
the fiduciary or lender
may not participate in the management of a contaminated site, exercise control
over its environmental compliance, or cause or contribute to the contamination.
The recent HSBC Bank settlement
illustrates how a lending institution can be held liable
for environmental contamination
and cleanup costs. The situation
began in 2004 when the bank seized a New York chemical company’s operating
funds, causing the company to abandon the chemicals and products at the
site. The heat
to the building was shut off as well and as a result, water pipes froze
and the fire suppression system broke, leading to chemical
leakage and the risk
of explosion.
The state of New York
argued that the bank should be held liable because it
“had participated in the management
of the facility.” The bank denied
the state’s
claims, but still agreed to pay $966,000 to settle the cleanup.
In an
effort to avoid environmental liability, the environmental
status of a site should be assessed prior to lending,
acquiring or taking title
to
the real
estate.
All transactional documents
related to the sale or acquisition of the real estate
should be reviewed from an environmental
perspective. Language
can
be added to
the transactional documents to allocate environmental liability and
indemnity among the parties.
Suggested provisions include
clarifying the party responsible for the management and
control
of the environmental operations and requiring
environmental
compliance and indemnity from the responsible party.
KDDK has been
a leader in environmental law in the Tri-State for
nearly two decades. If you have questions or need assistance
with
an environmental
law
matter, contact
Mike
Schopmeyer, Kent
Brasseale or Monica
Edwards, of our environmental
law team, at 812-423-3183.
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