Magazine article Journal of Property Management

Recovering for Environmental Damages and Remediation Costs

Magazine article Journal of Property Management

Recovering for Environmental Damages and Remediation Costs

Article excerpt

You do not have to be involved to be liable. By now, most property managers are probably aware that the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and other federal and state statutes impose responsibilities on owners for contamination no matter whether they were involved in the properties' contamination or not.

When contaminated materials are present, the Environmental Protection Agency (EPA) or local government agency (e.g. local health agency or regional water quality control board) requires that the hazardous materials be removed.

The government agency also has the ability to require the owner or manager to remediate the property (remove the toxic substances) and if they do not, then the government agency can remediate the property and recover the cost from the potentially responsible persons (PRPs).

PRPs include the generators of the hazardous materials, the owners at the time the contamination is discovered or remediation ordered, as well as the previous owners and managers. So even if your company was not involved, anyone in the chain of title since the contamination occurred would have liability to participate in the cost of remediation.

There may also be PRPs who generated contamination as a result of activities on other properties. Additionally, contamination originating at another property and migrating to the owner's property will make the generators and owners of the other property PRPs who must contribute to the costs of cleanup.

Fortunately, owners can recover their costs, whether voluntarily incurred or due to reimbursement of the government costs. Management's role in this process of recovery varies depending on the company, but in general, should a manager be asked to coordinate the process, he or she could expect to negotiate an extra fee for these services.

Once the need for remediation is established, the owner must determine how to best recover the costs of remediation. It is not necessary to spend the money in order to be able to bring a claim against PRPs to establish that they owe the money. Once it is established that the owner of property has any liability, the owner is entitled to bring action against others either for contribution of the actual amount owed or for determination of the extent to which contribution must be made.

To reduce losses from environmental liability, owners and managers should adopt an aggressive strategy. This will allow the owner the greatest potential for recovery and will lessen the time the property is unusable due to the claim. Following are some steps to follow as you plan to mitigate your losses:

Locate public records

Step 1: Read the public records to determine the information necessary to disclose all PRPs contained in an existing Phase I audit.

Once the EPA identifies the present owner of a property as a PRP, the owner must act to identify other PRPs who contributed to the contamination by their own activities on the owner's property or by using or owning nearby property which is a source of contamination.

Remediation action proposals (RAPs) filed with government agencies to propose a methodology for clean-up will include a Phase 1 environmental audit of the area. Thus, all the work to determine the identity of PRPs may have already been conducted, and be available just by checking health agency files or other local government files.

Conduct an audit

Step 2: If a Phase 1 audit cannot be found in public records, it should be completed to establish who the potential PRPs could be.

It is of course to everyone's advantage to spread the liability around by identifying the greatest number of people as PRPs. This task requires a technical investigation by the owner or manager.

The investigation should begin with a Phase 1 environmental audit of the entire area around a property even before looking at the contamination in the ground. …

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