Liability and Real Estate Issues | WQARF Program: Page 2 of 2

Lender Liability

ARS § 49-283 (H) A person who maintains indicia of ownership in a property primarily to protect a security interest in a facility and who does not participate in the management of the facility is not liable as an owner or operator of that facility pursuant to this section. This subsection does not apply to a person who does any of the following:

  1. Through intentional misconduct or gross negligence causes, contributes to or aggravates the release of a hazardous substance.
  2. Fails to disclose to the facility's purchaser the known presence of a release or a threatened release of a hazardous substance at the time of sale or divestiture of the facility or the security interest in the facility.
  3. Fails to obtain a phase I environmental assessment of the facility that complies with standards adopted by rule pursuant to subsection K of this section at the time of or at a reasonable time before foreclosure. This paragraph does not apply to residential properties with fewer than five residential units.
  4. Fails to do any of the following after acquiring ownership of the facility:
    1. Provide the department reasonable access so that the necessary remedial actions may be conducted.
    2. Undertake reasonable steps to control access to the area of known presence of a release of a hazardous substance to protect the public health and welfare and the environment.
    3. Act diligently to sell or otherwise divest the property within two years of the lender's possession or ownership, whichever is earlier.

ARS § 49-283 (I) A fiduciary is not personally liable as an owner or operator pursuant to this section. This section does not preclude claims against assets held in an estate, a trust or other fiduciary capacity for the release or a threatened release of a hazardous substance from one of the assets. This section does not apply if either of the following apply:

  1. A fiduciary through intentional misconduct or gross negligence causes, aggravates or contributes to the release or threatened release of hazardous substances or permits others to do so, except that a fiduciary shall not be liable for the intentional misconduct or gross negligence of any nonemployee agent or independent contractor if the fiduciary has not specifically directed the nonemployee agent or independent contractor to perform the grossly negligent act or engage in the intentional misconduct.
  2. The appointment of the fiduciary is for the purpose of avoiding liability under this article. It is prima facie evidence that the fiduciary was appointed to avoid liability under this article if the facility is the only substantial asset in the fiduciary estate.

ARS § 49-283 (J) Subsections F, G, H and I shall not be construed to affect the liability of any person who is otherwise liable with respect to the release or threat of release pursuant to this section.

ARS § 49-283 (L) A fiduciary may not be a fiduciary and grantor of the same fiduciary estate.

ARS § 49-283 (O) For purposes of this section:

  1. "Fiduciary" means:
    1. A trust company or bank certified or authorized to engage in the trust business pursuant to title 6, chapter 8, article 1.
    2. Any person appointed by a court or testamentary act to act as personal representative, executor, trustee, administrator, guardian, conservator, receiver or trustee in bankruptcy.
    3. Any person acting as a trustee of a deed of trust pursuant to section 33-803.
    4. Any person acting as a trustee pursuant to title 14, chapter 7.
    5. Any person acting pursuant to and subject to fiduciary obligations under the employee retirement income security act of 1974 (29 United States Code sections 1101 through 1114).
  2. "Indicia of ownership" means legal or equitable title that has been acquired through or is incident to the default of a borrower.