VOL. CLXXXIII – NO. 13 – INDEX 1141MARCH 27, 2006ESTABLISHED 1878
This article is reprinted with permission from the MARCH 27, 2006 issue of the
New Jersey Law Journal
. ©2006 ALM Properties, Inc. Further duplication without permission is prohibited. All rights reserved.
REAL ESTATE & TITLE INSURANCE
By Mitchell H. Kizner andDonna T. Urban
P
urchasers of properties subjectedto a discharge of hazardous sub-stances too often proceed with themistaken belief that they will be pro-tected from future liability for cleanupcosts as long as the seller has, or willreceive, a “No Further Action Letter”(NFA) from the New Jersey Departmentof Environmental Protection. The reali-ty, however, is that the issuance of a NoFurther Action Letter does not meanthat environmental obligations concern-ing a discharge have been satisfied withfinality. Recent revisions by the NJDEPto its groundwater quality standards andan upcoming adoption of its soil reme-diation standards underscore the factthat in various circumstances, theissuance of an NFAwill not protect abuyer from being called upon in thefuture, at substantial expense, to per-form tasks concerning prior releasesinto the environment which it had norole in creating. There are large risks if the buyer of a property regards an NFAas the end of the inquiry into obligationsconcerning the environmental conditionof a site.Purchasers that buy sites requiringfurther environmental assessment,remediation or maintenance can becompelled by governmental authoritiesto perform those tasks even if they hadnothing to do with the contamination.Under the New Jersey SpillCompensation and Control Act, pur-chasers of contaminated properties canbe held liable for the cost of cleaning upspills that occurred prior to their owner-ship, unless they follow certain pre-scribed due diligence requirements.While special protection is affordedto buyers of property purchased afterJanuary 6, 1998 (the effective date of the Brownfield and Contaminated SiteRemediation Act), in reliance upon theprior issuance of a No Further ActionLetter for the site, even this protection islimited. N.J.S.A. 58:10-23.11gd(2)(e)and 58:23.11gf. For instance, there is noliability protection to a buyer who reliessolely upon a previously issued NFAfordischarges that occur between theissuance of the NFAand the purchase of the property. N.J.S.A. 58:10-23.11gd(2)(e). Abuyer is likewise notabsolved of liability for discharges thatmigrate offsite of the property coveredby the NFA, or for failure to maintaininstitutional or engineering controls onthe property, or otherwise comply withthe conditions of the NFA. Id. And of course, apart from legal liability forcleanup costs, the existence of unex-pected, continued environmentalimpairments concerning a property willreduce the value of a buyer’s investmentin that property.Furthermore, the NJDEPissuesNFAs based upon information availableto it at the time. The Department canrescind or modify the NFAto requireadditional remediation in various cir-cumstances such as where: (1) it adoptsan amendment to a remediation stan-dard that decreases the standard by anorder of magnitude after the issuance of a NFA; (2) a discharge that occurredprior to the issuance of a NFAis discov-ered after the issuance of the NFA; (3) acontaminant exposure pathway from adischarge that predates the NFAis iden-tified after the NFAis issued; (4) theperson who acquires the property failsto comply with the conditions of theNFA; or (5) the approved remediation isno longer protective of public health,safety and the environment. N.J.A.C.7:26C-2.6(d). Moreover, the NJDEPcan rescind an NFAif it later discoversthat information was withheld from theDEPprior to its issuance.It must also be recognized that notall NFAs are alike. Some NFAs areissued without conditions or restrictionswhile some are conditioned upon fur-ther specific requirements. Andalthough an unconditional NFApro-vides strong protection against futureenvironmental obligations, that protec-tion is not absolute.An unconditional NFAcan be re-opened by the NJDEPif remedial stan-dards for a particular chemical of con-cern are strengthened by at least anorder of magnitude. The provision forreopening of NFAs in the face of strengthened environmental standards isnot merely academic — in November
Buyer may face future liability for environmental cleanup costs
Kizner and Urban, shareholders at Flaster/Greenberg of Cherry Hill, aremembers of the firm’s environmental law practice group.
No Further Action Letter Could Be Unreliable
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