Poisoned Property

Find out what toxic waste is lurking on your land before you buy--and avoid footing the bill to clean it up later.

Toxic waste, heavy metals, Super fund sites . . . these all have to do with old mines and abandoned factories, right? Not necessarily. When you buy property for your business, it's a sure bet that someone else owned it before you, and someone else before that. Maybe it was a dry cleaner who routinely poured used solvent down the drain and out into an underground leaching field. Maybe it was a farmer who disposed of almost--but not quite-- empty pesticide barrels by tossing them into the ravine. Maybe it was a skeet-shooting resort with lead shots peppering the ground and poisoning wild geese. When your property turns out to be contaminated, it's your legal responsibility to pay for the cleanup--even if your business had nothing to do with creating the problem.

That's because of the federal Comprehensive Environmental Response, Compensation and Liability Act, better known as CERCLA, or the Superfund law. This 20-year-old law holds property owners responsible for the cost of cleaning up environmental contamination found on their property. Typically, the state or federal agency discovering the problem seeks to recover the cost of cleanup from the party who's easiest to find: the current owner. Then it's up to that owner to track down whoever was responsible for the contamination and sue for compensation. (Given the thousands of convoluted Superfund lawsuits mired in the courts, it's obvious the ones "cleaning up" are the lawyers.)

The legal principle involved here is "joint and several liability." It means that any one of the parties involved can be held responsible for the entire cost. In the case of contaminated property, that could be the individual or business that created the problem in the first place, the property owner at the time of contamination, the current owner or even the lender who helped finance the purchase of the property. It's convenient for government agencies, but hardly fair to innocent landowners trying to run their businesses.

Why don't property owners just grit their teeth, pay the cost and get on with life? Because environmental cleanup is extremely expensive. Coping with a contaminated well, for instance, might involve removing all the contaminated soil and paying to dispose of it, which could cost hundreds of thousands of dollars. Dealing with a major industrial dumpsite is even more costly. Accordingly, while industrial brownfields and toxic-waste sites must be cleaned up for the good of society, nobody wants to be the one who has to pay for it.

Congress is aware of the problems, but it has yet to forge a solution. Since 1992, Congress has been trying to agree on the necessary reforms to the Superfund law. Republicans are looking for major business-friendly revisions, while Democrats are hoping to address the problems by tinkering with the rules and regulations for enforcing the law rather than rewriting the law itself. The result is a stalemate that many expect to continue. If Congress does manage to reform the law, chances are it will provide specific protections for small businesses and local governments, encourage reuse of brownfields and protect recyclers who meet certain requirements.

Steven C. Bahls, Dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

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This article was originally published in the March 2000 print edition of Entrepreneur with the headline: Poisoned Property.

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