Minimizing Environmental Liability in Real Estate Transactions

Under federal and state environmental laws, an owner of real property can be held “strictly” liable (liability without proof of fault or causation) for the entire cost of remediating soil, groundwater, or indoor air contamination. Further, a tenant whose operations are linked to contamination on real property can be held liable as an “operator” for such cleanup costs.  Relatively simple cleanups can easily run in excess of hundreds of thousands of dollars, with more complicated cleanups running into millions of dollars.

Given the magnitude of these potential liabilities, parties to real estate transactions should be aware of basic tools and principles to avoid or minimize environmental liability, as well as common pitfalls.  This article provides an overview of contractual allocation of environmental liability, use of “as-is” clauses in sale and lease contracts, the purpose and legal effects of indemnities and releases, and potential remaining claims by government agencies.

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IN BRIEF

Ecology Set to Issue New Human Health Criteria

The Washington Department of Ecology (DOE) will propose a new fish consumption rule (to replace the current federal standards covering Washington State)—setting new pollution limits for wastewater dischargers. The consumption rule requires that water be clean enough so that humans can eat the fish that swim in the water. The limits are at least as protective as the federal standard, if not more so for all standards except arsenic, which DOE proposes to update in accordance with the federal drinking water standard. DOE’s proposal is based on the levels of fish consumption in Washington State, which are higher than the national consumption levels on which the federal standards are based. The Rule may increase the burden on wastewater dischargers by creating stricter limits on pollution that can be discharged.

Water Rights & GMA: Supreme Court Considering Review 

On March 25, the Petitioners in Whatcom County  v. Eric Hirst, et al., a case addressing the relationship between growth management and water rights, filed a petition for review with the State Supreme Court. As discussed in our February 25 alert, the Court of Appeals reversed a decision by the Growth Management Hearings Board, which had concluded that the County’s rural measures protecting water resources did not comply with the Growth Management Act (GMA). The Petitioners' primary argument to the Supreme Court is that the appellate court decision conflicts with Supreme Court precedent regarding the relationship between permit-exempt wells and instream flows. The Supreme Court is likely to consider whether to accept review this summer.

Court of Appeals Rules on Enforcing Easements

A recent unpublished Washington Court of Appeals case illustrates some of the factors courts consider in enforcing easements and similar agreements.  In White Water Investment v. Cool Beans Eastlake, LLC, the court upheld a trial court’s refusal to order removal of a building constructed in violation of a reciprocal easement agreement that provided for shared parking and access between two properties.  Considering the equitable defense of “balancing the equities,” the court weighed factors such as the plaintiff’s purchase of its property at a discount based on knowledge of the violation by the neighboring property owner, a delay of many years before suit was filed, and the fact that the defendant was a successor owner who had not itself constructed the violating improvements.  The court distinguished other cases in which the “balancing of equities” defense was not available to a defendant because the defendant itself had constructed improvements in knowing violation of an easement or other restriction.  Among other things, the case illustrates how the passage of time and the actions of the parties to an easement can affect the enforceability of the easement.

Ecology to Require New Stormwater Permit for Construction

The General Permit currently covering discharges of stormwater associated with construction activities is set to expire at the end of 2015.  The Washington Department of Ecology (DOE) plans to revise and reissue the permit, effective January 1, 2016, but any party currently holding a permit that plans to start or continue construction after December 31, 2015 must reapply for coverage by July 3, 2015. Existing permits will not be grandfathered in. DOE will provide opportunities for comments on revisions to the permit, but parties seeking renewal must submit applications before the scheduled public hearings and workshops take place. VNF is tracking proposed changes to the permit and any opportunities for comment.  Contact Asha Venkataraman for more information.

Seattle Council Adopts SMP Update  

On April 6^th the Seattle City Council adopted by ordinance its Updated Shoreline Master Program (SMP), amending its 2012 SMP Update in response to the Washington Department of Ecology (DOE) request last June that it make the  changes to reflect DOE’s comments and conditions.  A summary of the changes is presented in Clerk File 314245.  Notable changes include additional setback standards in several shoreline environments, revisions to the standards identifying when shoreline public access is required for multifamily development, greater specificity regarding which uses are allowed in specific commercial and industrial environments, and more detailed regulations related to floating homes and other floating structures. DOE now has 30 days to determine if the latest SMP Update is consistent with DOE’s June 2014 Conditional Approval.  If so, the SMP will become effective 14 days after DOE’s final determination.

Bellevue Amends Code to Address “Rooming Houses” in Residential Neighborhoods

The City of Bellevue amended its land use code based on a recommendation by the City Planning Commission that the City take steps to limit home owners’ ability to divide  homes in single-family residential neighborhoods into individually leased rooms.  On April 6, the Bellevue City Council voted unanimously to adopt an ordinance that amends their land use code to identify “rooming house” as an allowed use only in multi-family zones and certain commercial and Bel-Red sub-area zones.  Additionally, the City limited rooming houses to no more than four rooms available to rent to no more than five individuals at any one time.  On-site parking for a rooming house must be commensurate to the number of bedrooms available for lease.

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