Property Management and Hazardous Waste Risk

By Ferguson, Jerry T. | Journal of Property Management, July/August 1995 | Go to article overview

Property Management and Hazardous Waste Risk


Ferguson, Jerry T., Journal of Property Management


The responsibilities of professional property management have grown along with the legal obligations of property owners. One example is the manager of owner liability because of a tenant's improper hazardous waste disposal on the leased premises. Ever since 1984, when the Environmental Protection Agency (EPA) successfully sued the Monsanto Company for the acts of its tenants, lessors have attempted various ways to avoid, transfer or minimize the liability risk.

Property managers need to be aware of the extent of this risk and the limits of the methods used to handle it. Often, they may have to persuade a reluctant owner that the expenses to manage the risk are necessary. In addition, they must realize that government agencies may drag them into expensive litigation in an attempt to recover cleanup costs.

Base of liability

The bases of the liability risk facing landlords are the Comprehensive Environment Response Liability Act (CERCLA or Superfund Act) and its major amendment, the Superfund Amendment and Reauthorization Act (SARA).As many legal critics have stated, CERCLA was hastily written and enacted in response to media sensationalism and public outcry over the Love Canal crisis. Its ambiguous language left the courts and the EPA with the task of defining the conditions and situations that cause liability. Moreover, CERCLA's definition of "responsible party" for cleanup expenses is so broad that nearly everyone involved in a real estate transaction may be liable if hazardous waste is later discovered on purchased or leased realty.

At first, lessors seem to meet the defined defense of "innocent party" if the lessee is entirely the cause of the pollution. However, SARA denies this defense when a continuing legal relationship exists between the polluter and the property owner. A lease constitutes such a relationship.

EPA option

If hazardous waste pollution is discovered and the EPA (or its approved state agency) becomes involved, it has three options in seeking a cleanup. First, the agency may seek an injunction to force the responsible parties to clean up the site with agency-approved methodology. To receive an injunction, the agency must show an immediate and substantial danger to the public or the environment. This danger would entail an actual or threatened release of stored or buried waste.

Second, the EPA may negotiate with the responsible people to act voluntarily. If it cannot convince the parties to take voluntary action, the agency may issue an administrative order requiring cleanup to begin within 60 days of the notification. The colloquial name for this notification is a "drop dead letter." Yet, the agency must resort to court action to enforce its order.

Lastly, the EPA may use Superfund money to clean up the site and sue for reimbursement from responsible parties, including the owner and the lessee. In order to use Superfund money, the polluted site must be on a priority list of such property. Presently, there are about 1,200 sites on the list, and the EPA is adding about 100 sites a year. State agencies, however, can use state money for the cleanup without the listing requirement. They also can seek damages from owners and tenants.

One danger exists for property owners who insist on a court hearing before beginning an EPA-ordered cleanup or after the EPA has cleaned up the site. The court, under CERCLA, may award up to three times the estimated or actual costs to the EPA as civil penalties.

Harsh Interpretation

In trying to interpret the will of Congress when it enacted CERCLA, courts have broadened the scope of liability. For instance, neither CERCLA nor SARA specifically state that two or more parties responsible for polluting the same property are "jointly and severally" liable for cleanup. Nevertheless, courts have ruled that the EPA is not responsible for apportioning liability; one of the parties may have to pay the entire bill and seek reimbursement from fellow polluters.

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