The purchase of real estate in urban communities can come with its own set of unique legal challenges that potential landowners should fully understand and consider prior to closing on the purchase of any such property. One of these unique challenges is the discovery of contaminated soil and groundwater on recently acquired property due to the illegal release or storage of hazardous wastes by a former or adjacent landowner.
Due to the high density of city lots and the close proximity of residential structures to commercial businesses in urban communities, the presence of contaminated soil and groundwater on urban properties is a real risk potential purchasers must consider. While a potential purchaser may reduce the risk of acquiring contaminated property by paying for a title opinion and requesting a disclosure statement from the seller, often times these reports provide little, if any, information on the land-use activities of historic owners and those of neighboring properties. As such, if after purchasing a new property a landowner discovers that the soil and/or groundwater on the land is contaminated due to the illegal disposal or storage of hazardous wastes by a former or neighboring landowner, the new owner may be liable for the costs and expenses associated with the removal and clean-up of said contamination unless the new owner can establish by a preponderance of the evidence a defense to clean-up liability provided for in the Texas Solid Waste Disposal Act.
Accordingly, prior to the purchase of any urban property, potential landowners should be diligent about investigating not only the chain of title associated with the property, but the land-use activities of former and neighboring property owners. If contaminated soil or groundwater is discovered prior to, or after, the purchase of any such property, landowners should seek legal counsel knowledgeable in available state programs that may protect innocent purchasers of contaminated land.
Liability for Clean-up Costs
Liability for the costs to clean-up groundwater or soil contaminated by the illegal disposal and storage of solid and hazardous wastes is governed by the Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA, and the Texas counterpart in Chapter 361 of the Texas Health and Safety Code known as the "Texas Solid Waste Disposal Act." Under the Texas Solid Waste Disposal Act, a landowner of contaminated land is considered a potentially responsible party (PRP), liable for all clean-up costs, regardless of whether or not the current owner was actually responsible for the release of the hazardous waste. Texas Health and Safety Code Sec. 361.271. Liability for clean-up costs is strict, joint and several, and can be applied retroactively; in other words, all current and former landowners may be liable for the total cost of clean-up.
Hypothetical
Question: If the State determines that a former landowner is responsible for the release of chemical (X), a highly serious hazardous waste that is costly to clean-up, and the current landowner is responsible for the release of chemical (Y), a less serious hazardous waste that is cheaper to clean-up, are the current and former landowners jointly responsible for the entire clean-up cost, even though chemical (X) costs the most to remove?
Answer: Yes, both landowners are held joint and severally liable for all clean-up costs unless one can make a sufficient showing that their chemical contribution is divisible from the rest of the land and the clean-up costs (this is often times extremely difficult to prove).
Avoiding Joint & Several Liability
"Innocent Owner Defense"
Under the Texas Solid Waste Disposal Act, the owner of contaminated land, a PRP, is responsible for all clean-up costs unless they can establish by a preponderance of the evidence that the release of hazardous materials was caused solely by one of the following acts: Texas Health and Safety Code Sec. 361.275(a).
- An act of God (Unforeseen);
- An act of war (During combat);
- An act or omission by a third party, the "Innocent Land Owner Defense;" or
- Any combination of (1), (2) and (3).
If a PRP wants to avail themselves to the protections of the "Innocent Land Owner Defense," the PRP must establish by the preponderance of the evidence that the PRP exercised due care concerning the solid waste, considering the characteristics of the solid waste, in light of all relevant facts and circumstances; and took precautions against foreseeable acts or omissions of the third person and the consequences that could foreseeably result from those acts or omissions. Texas Health and Safety Code Sec. 361.275(b). However, a PRP may not claim the "Innocent Land Owner Defense" if the third party is an employee or agent of the PRP, or the third party has a direct or indirect contractual relationship with the PRP and the act or omission of the third person occurred in connection with the contractual relationship. Texas Health and Safety Code Sec. 361.275(c). The latter exception is of importance due to the fact that a real estate sales contract or a deed conveyance may be considered a "contractual relationship" that could void a landowner's claim to the "Innocent Owner Defense."
If a landowner, PRP, is subject to liability due to the contractual relationship it had with the former owner of the contaminated property, the PRP may still be able to claim the "Innocent Owner Defense" if they can establish by a preponderance of the evidence that: Texas Health and Safety Code Sec. 361.275(e).
- The landowner, a PRP, has satisfied the requirements of Texas Health and Safety Code Sec. 361.275(b), see above;
- At the time the PRP acquired the property the PRP did not know and had no reason to know that a hazardous substance that is the subject of the release or threatened release was disposed of on, in, or at the property; or
- The PRP acquired the facility by inheritance or bequest.
In order to demonstrate the condition under item (2) above, the PRP must have made, at the time of the property acquisition, appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability.
In deciding whether the PRP meets this condition, the court shall consider:
- Any specialized knowledge or experience of the PRP;
- The relationship of the purchase price to the value of the property if the property were uncontaminated;
- Commonly known or reasonably ascertainable information about the property;
- The obvious presence or likely presence of contamination of the property; and
- The defendant's ability to detect the contamination by appropriate inspection.
If a landowner established, by a preponderance of the evidence, that they are protected from liability under the "Innocent Owner Defense," the landowner should be aware that if the property value increases as a result of the State's remedial actions, the State may place a lien on the property for the difference in the market price contributable to the State's clean-up efforts.
DISCLAIMER: The foregoing information is not legal advice and is general in nature and not applicable to all situations. The reader should not rely on these general statements and should consult with knowledgeable persons before taking any actions.