Section 37 Innocent Landowner Defense

• Library: Environmental Law 2002 Supp Replacement chs

In 1986, CERCLA was re-authorized. Among the changes was the enactment of “the innocent landowner defense.” This was accomplished by exempting from the definition of “contractual relationship,” found in CERCLA § 107(b)(3), 42 U.S.C. § 9607(b)(3), land contracts when the following apply:

• The property was acquired after the disposal of the hazardous substance; and

• The present owner

( did not know, and had no reason to know, of the hazardous substances;

( is a governmental entity that acquired the land by involuntary transfer or through the exercise of eminent domain; or

( acquired the land by inheritance or bequest.

42 U.S.C. § 9601(35).

This defense has changed the focus of real estate transfers, particularly in business settings. Under the all-encompassing reach of CERCLA and state Superfund laws, owners of contaminated real property found that they could be responsible for clean-up costs even though they acquired the property after the contamination had occurred and did not know of or contribute to the contamination. Landlords found themselves liable for actions taken by their tenants in some cases, and lenders were judged liable for cooperating with borrowers. As a result of these liabilities and a series of judicial, legislative, and administrative attempts to narrow and clarify them, environmental due diligence before purchase has become an absolute legal and practical necessity for owners and lenders.

The Superfund Amendments and Reauthorization Act of 1986 (SARA), Pub. L. No. 99-499, 100 Stat. 1613, defense arguably provided some relief for participants in real estate transactions. To qualify for the defense, landowners must demonstrate that they had “no reason to know” of the existence of contamination at the time they purchased a property. 42 U.S.C. § 9601(35)(A)(i). To prove “no reason to know,” landowners must have...