december 2001

New Legislation Extends Innocent Purchaser Environmental Liability Protection to Qualified Parties Who Acquired Property Before September 14, 1993

BACKGROUND

The New Jersey Spill Compensation and Control Act (“Spill Act”) previously provided environmental liability protection to qualified parties who acquired real property on or after September 14, 1993. Those provisions have now been extended to qualified parties who acquired contaminated property before September 14, 1993.

Under the new Spill Act provision, a pre-September 1993 purchaser is not liable for cleanup and removal of contamination, or for other damages to the State or third parties under the Spill Act or civil common law, as long as that party: (1) Acquired the property after the discharge of hazardous substances; (2) Undertook all appropriate inquiry concerning the condition of the real property and did not know, and had no reason to know, that the property was contaminated; (3) Did not discharge the hazardous substance and was not otherwise responsible for the hazardous substance; and (4) Gave notice to the New Jersey Department of Environmental Protection of the existence of the contamination at the time of actual discovery.

A party who qualifies for this liability protection may now be eligible for reimbursement of cleanup costs from the State's Spill Fund.

The new legislation also provides qualified parties with protection against liability for natural resource damages.

WE RECOMMEND

If you acquired property prior to September 14, 1993, we recommend that you evaluate whether you qualify for the new environmental liability protection and funds that may be available from the State. Additionally, if you are considering acquiring property from a party that qualifies for the new liability protection, we recommend that you carefully evaluate the allocation of environmental liability when preparing your purchase contract.

If you have any questions concerning the new legislation, please contact Jay A. Jaffe.