Real Estate Transactions and Liability | NPL Superfund Sites
For properties located within the boundaries of federal Superfund sites, the following policies lend clarification to liability concerns as a new or prospective property owner.
In 1991 the United States Environmental Protection Agency (EPA) issued a national policy overview document entitled, “Homeowners Exempted from Cleanup Costs”, hereafter “this policy”. This document provides a description of personal property conditions within a federal Superfund site in the “Background” section:
“Several sites that are the subject of a response action (removal or remedial activities) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund) include properties that are used exclusively as single family residences (one-to-four dwelling units). At several larger sites, soil or groundwater contamination may be so extensive that there are several hundred of these residential properties located on a Superfund site.”
“Some owners of residential property located on a Superfund site are concerned about potential liability for performance of a response action or payment of cleanup costs because they may come within the definition of "owner'' under the statute.2 Owners of residential property located on a Superfund site have expressed the concern that they may be unable to sell these properties because the buyer and the lending institution may also be concerned about potential liability”.
The 1991 EPA policy states the following:
“In the exercise of its enforcement discretion, the agency (EPA) has determined that it will not require owners of residential property located on a Superfund site to perform a response action or pay response costs if the owner's activities are consistent with this policy.' Under this policy, EPA's exercise of enforcement discretion will extend to lessees of residential property provided that the lessees' activities are consistent with this policy. This policy also applies to person who acquire residential property through purchase, foreclosure, gift, inheritance or other form of acquisition, as long as those person's activities after acquisition are consistent with this policy.”
“This policy does not apply to an owner of residential property who has undertaken activities leading to a release or threat of release of hazardous substances, resulting in the taking of a release of hazardous substances, resulting in the taking of a response action at the site.”
Additionally, prior to close of escrow on a real (commercial) property purchase, under state law, a buyer may elect to pursue a Prospective Purchaser Agreement (PPA) with the State of Arizona, under Arizona Revised Statutes (ARS) § 49-285.01 With a PPA, the Arizona Department of Environmental Quality (ADEQ) provides a written release and a covenant not to sue a prospective buyer that includes immunity from contribution claims for any potential state liability for existing contamination under this article or CERCLA. The requirements for a PPA are:
1. The facility is within a site identified on the registry maintained by the department pursuant to ARS § 49-287.01 or the department has been provided sufficient information to reasonably identify the extent of the contamination at the facility;
2. The person is not currently liable for an existing or threatened release of a hazardous substance at the facility;
3. The proposed redevelopment or reuse of the facility will not contribute to or exacerbate existing known contamination or unreasonably interfere with remedial measures necessary at the facility or cause the contamination to present a substantial health risk to the public; and
4. The agreement will provide a substantial public benefit.
Note that the EPA has a similar program: “Superfund Cleanup Subject Listing Comfort Letters”.
ARS § 49-283 sets the standard by which the ADEQ is authorized to hold a property owner responsible for a release or threatened release of a hazardous substance. A homeowner is not financially responsible unless their own actions led to a release or threatened release of hazardous substances requiring a cleanup of their property. This information is designed to alleviate concerns about cleanup liability for homeowners, as well as parties involved in real property transactions, such as lenders and title insurers. The applicable ARS statutes are provided below.
ARS § 49-283 (A) For purposes of imposing liability under this article, and except as provided in this section, a person is deemed the party responsible for the release or threatened release of a hazardous substance if the person:
1. Owned or operated the facility:
(a) When the hazardous substance was placed or came to be located in or on the facility.
(b) When the hazardous substance was located in or on the facility but before the release.
(c) During the time of the release or threatened release.
2. Owned or possessed the hazardous substance and arranged, by contract, agreement or otherwise, for the disposal, treatment or transport for disposal or treatment of the hazardous substance.
3. Accepted for transport to a disposal or treatment facility waste that contained a hazardous substance and either selected the facility to which it was transported or disposed of it in a manner contrary to law.
ARS § 49-283 (B) Notwithstanding the provisions of subsection A, a person that owns real property is not a responsible party if there is a release or threatened release of a hazardous substance from a facility in or on the property unless one or more of the following applies to that person:
1. Was engaged in the business of generating, transporting, storing, treating or disposing of a hazardous substance at the facility or disposing of waste at the facility, or knowingly permitted others to engage in such a business at the facility.
2. Permitted any person to use the facility for disposal of a hazardous substance.
3. Knew or reasonably should have known that a hazardous substance was located in or on the facility at the time right, title or interest in the property was first acquired by the person and engaged in conduct by which he associated himself with the release. For the purpose of this paragraph, a written warranty, representation or undertaking, which is set forth in an instrument conveying any right, title or interest in the real property and which is executed by the person conveying the right, title or interest, or which is set forth in any memorandum of any such instrument executed for the purpose of recording, is admissible as evidence of whether the person acquiring any right, title or interest in the real property knew or reasonably should have known that a hazardous substance was located in or on the facility. For purposes of this paragraph, "associated himself with the release" means having actual knowledge of the release and taking action or failing to take action that the person is authorized to take and that increases the volume or toxicity of the hazardous substance that has been released.
4. Took action which significantly contributed to the release after he knew or reasonably should have known that a hazardous substance was located in or on the facility.
ARS § 49-283 (C) Any liability which accrues to an owner of real property under this section does not accrue to any other person who is not an owner of the real property merely because the other person holds some right, title or interest in the real property. An owner of real property on which a public utility easement is located is not a responsible party with respect to any release caused by any act or omission of the public utility which holds the easement in carrying out the specific use for which the easement was granted.
ARS § 49-283 (D) A person otherwise deemed a responsible party is not liable under this article if he can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the resulting damages were caused solely by:
1. An act of God.
2. An act of war.
3. An act or omission of a third party, whether lawful or unlawful including acts of vandalism or unlawful disposal of hazardous waste or hazardous substances, other than an employee or agent of that person or other than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with that person, unless the sole contractual arrangement arises from a published tariff and acceptance for carriage by a common carrier by rail, if that person establishes by a preponderance of the evidence that:
(a) He exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of the hazardous substance in light of all relevant facts and circumstances.
(b) He took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions.
4. A release or threatened release which was subject to limits or conditions in a federal permit or a state permit relating to the protection of public health or the environment and the operation of the releasing facility has been and is in compliance with applicable limits or conditions.
5. The application of a pesticide product registered under the federal insecticide, fungicide, and rodenticide act (61 Stat. 163) and applied according to label requirements.
6. Liability has been assumed by the federal post closure liability fund established under 42 United States Code section 9607(k).
7. Any combination of paragraphs 1 through 6 of this subsection.
Off-Site Migration Liability Policy
In general, the EPA will not take action to compel such property owners to perform cleanups or to reimburse the agency for cleanup costs where contamination to their property was caused solely by migration of contaminants from other property.
This information was adapted from the U.S. EPA Publication, Policy Toward Owners of Property Containing Contaminated Aquifers, November, 1995.
Under Arizona law, a person is not responsible for a hazardous substance that is located on or beneath the property if the hazardous substance that is located on or beneath the property is present solely because it migrated from property that is not owned or occupied by that person.
This statement is adapted from ARS § 49-283 (E): A person is not a responsible party with respect to a hazardous substance that is located on or beneath property that is owned or occupied by that person if the hazardous substance is present solely because it migrated from property that is not owned or occupied by that person and that person is not otherwise a responsible party as prescribed by subsection A, paragraph 2 or 3.
Contact the ADEQ Project Manager for the site in question for additional information.