Law Provides Liability Relief to CA Brownfield Site Purchasers
By: Dan Johnson

As the Southern California real estate market continues to grow, the number of available sites is shrinking. With demand remaining high, new avenues of development are being found. One solution is the redevelopment of Brownfields sites, areas of land previously contaminated by waste or other use. In the past, such redevelopment has been seriously impeded by liability requirements under California's environmental laws.

Now, with Assembly Bill 389, entitled "California Land Reuse and Revitalization Act of 2004" (the Act), liability relief is provided to both purchasers of contaminated properties and owners of properties adjoining contaminated sites. Signed into law on September 23, 2004, the bill extends the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability protections under the 2002 federal "Small Business Liability Relief and Brownfields Revitalization Act" to those who purchase California brownfields sites.

Previously, the current property owner or a potential buyer could be held financially responsible for the cleanup process if contamination was found, even if that party had no part in the damage. Until this new Act was passed, there was no appropriate modification to close the liability gap between federal and California law.

The Act will change California law by altering the Health & Safety Code to provide an innocent landowner, a prospective purchaser, or an adjacent property owner with liability relief. This allows any of these parties to avoid responsibility for costs or damage claims for contamination on, under, or adjacent to the property in question if the party performs environmental assessment and remedial actions under regulatory supervision. If the parties involved perform the required assessments, the Act also provides protection from later legal action or requirements by a regulatory agency of any kind. While this doesn't provide an easy way out, it is a step in the direction of accurate liability assessment.

The first step for interested parties is to investigate the environmental status of the property before it is purchased. In order to do this, an oversight agreement with a regulatory agency must be made and a proposed site assessment plan submitted. A Phase I Environmental Assessment is conducted prior to acquisition. The assessment must meet the standards of the American Society for Testing and Materials (ASTM), until the U.S. Environmental Protection Agency's finalized "All Appropriate Inquiries" regulations are effective.

In the event contamination is found, the affected party must perform "Appropriate Care” (A.C.). This involves a response that meets a number of conditions. The appropriate response to meet the A.C. standard will be determined by a state regulatory agency in order to prevent unnecessary risk to human health or the environment. The action taken must meet the standards of a written plan provided by the regulatory agency. In addition, a regulatory agency must oversee and verify the approved plan. The property owner who finds contamination must also comply with preexisting land use controls, including restrictions on property use or maintenance of remedial facilities.

If these steps are completed, immunity is guaranteed in most instances for claims under specified "Applicable Law," otherwise known as the provisions of state statutory and common laws that impose liability for pollution conditions. These include the following: the Water Code; the Fish and Game Code; the Underground Storage Tank and Aboveground Storage Tank provisions of the Health and Safety Code; the Hazardous Substances Account Act; and the Health and Safety Code. This immunity usually applies to lawsuits by third parties and state and local agencies. This new law also guarantees the property owner will not be required to conduct additional cleanup action unless the property conditions have been deemed an imminent endangerment to human health or the environment. There is also a provision for property owners who establish immunity to collect attorneys' fees from lawsuits directly relating to the contamination.

Though there are many concessions for the landowner, the Act also allows for exceptions to liability immunity. Actions by redevelopment agencies do not have immunity, as stated under the Polanco Redevelopment Act. Also, an agency buying property or taking it by eminent domain can consider the impact contamination may have on the property. In addition, a city or county cannot be held back from enforcing cleanup requirements as a condition for property development.

The Act is effective for the next five years, through January 1, 2010. The increased liability relief will extend beyond 2010. The agencies are also required to allow access to website information pertaining to brownfields and other cleanup sites through a single source.

The "California Land Reuse and Revitalization Act of 2004" clarifies and remedies some previous gaps in liability law. Over the next five years, property exchange and redevelopment most likely will continue to grow. This new Act is an attempt at keeping up with the real estate and development industry and a step in the right direction.

Daniel E. Johnson is the principal of Environmental Business Solutions (EBS), which functions as the San Diego office of SCS Engineers and may be reached at danj@ebsenvironmental.com