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 fundsites . . . these all have to do with old minesand abandoned factories, right? Not necessarily. When you buyproperty for your business, it's a sure bet that someone elseowned it before you, and someone else before that. Maybe it was adry cleaner who routinely poured used solvent down the drain andout into an underground leaching field. Maybe it was a farmer whodisposed of almost--but not quite-- empty pesticide barrels bytossing them into the ravine. Maybe it was a skeet-shooting resortwith lead shots peppering the ground and poisoning wild geese. Whenyour property turns out to be contaminated, it's your legalresponsibility to pay for the cleanup--even if your business hadnothing to do with creating the problem.

That's because of the federal Comprehensive EnvironmentalResponse, Compensation and Liability Act, better known as CERCLA,or the Superfund law. This 20-year-old law holds property ownersresponsible for the cost of cleaning up environmental contaminationfound on their property. Typically, the state or federal agencydiscovering the problem seeks to recover the cost of cleanup fromthe party who's easiest to find: the current owner. Thenit's up to that owner to track down whoever was responsible forthe contamination and sue for compensation. (Given the thousands ofconvoluted Superfund lawsuits mired in the courts, it's obviousthe ones "cleaning up" are the lawyers.)

The legal principle involved here is "joint and severalliability." It means that any one of the parties involved canbe held responsible for the entire cost. In the case ofcontaminated property, that could be the individual or businessthat created the problem in the first place, the property owner atthe time of contamination, the current owner or even the lender whohelped finance the purchase of the property. It's convenientfor government agencies, but hardly fair to innocent landownerstrying to run their businesses.

Why don't property owners just grit their teeth, pay thecost and get on with life? Because environmental cleanup isextremely expensive. Coping with a contaminated well, for instance,might involve removing all the contaminated soil and paying todispose 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 sitesmust be cleaned up for the good of society, nobody wants to be theone who has to pay for it.

Congress is aware of the problems, but it has yet to forge asolution. Since 1992, Congress has been trying to agree on thenecessary reforms to the Superfund law. Republicans are looking formajor business-friendly revisions, while Democrats are hoping toaddress the problems by tinkering with the rules and regulationsfor enforcing the law rather than rewriting the law itself. Theresult is a stalemate that many expect to continue. If Congressdoes manage to reform the law, chances are it will provide specificprotections for small businesses and local governments, encouragereuse of brownfields and protect recyclers who meet certainrequirements.

Steven C. Bahls, Dean of Capital University Law School inColumbus, Ohio, teaches BIZ Experiencesship law. Freelance writer JaneEaster Bahls specializes in business and legal topics.

Audit That Land

Until Congress changes the law, BIZ Experiencess are subject to thesame rules on liability for contaminated property as majorcorporations. Even if the site was contaminated years before bysome other owner, government agencies can still force you to paythe entire cost of remediation. As a result, if the land you buy iscontaminated, it's important for you to be aware of it soyou'll be able to walk away from the deal.

It's not always easy to tell. In some cases, there's anoil slick on a nearby creek or patches on a vacant lot wherenothing will grow. People drinking water from a well near theproperty might become ill and start asking why. Typically, the cityor county health department investigates such problems and reportsits suspicions to the state EPA, which then orders the propertyowners to hire consultants and remediation crews. If the case issevere, the agency may hire a crew, then sue the owner for the costof cleanup. It's often a battle of experts to decide the mostsuitable remedy.

Under current law, the only way for a property owner to get offthe hook is the "innocent landowner defense." CERCLAexcuses landowners who obtained the land after it was contaminated,but only if they inherited the land or did not know about or evensuspect the contamination. It's not good enough just to havebought blind. In order to prove you didn't know about theproblem, you must have undertaken "all appropriateinquiry" into prior owners and prior uses of the property.

That means you need to have an environmental audit before buyingany commercial property. A Phase I environmental audit is apreliminary assessment by an environmental engineer or consultant,which involves looking over the property for evidence ofcontamination and examining the records of previous owners. Aconsultant who suspects problems would then recommend a Phase IIassessment, which involves digging, drilling and testing samples.For a small retail site, a Phase I assessment may cost $1,000 to$2,000. For a factory site, it could run $10,000 or more.

Ask the seller if there's been an environmental audit, andask to see the report. If not--or if you think you'd betterhave your own audit--look for a well-qualified consultant orengineer. Check references and ask to be put in touch with anattorney who's worked with the consultant.

Don't assume you can simply put a clause in the purchasecontract stating that the seller assumes all responsibility forenvironmental contamination should it appear. Federal law does notallow buyers to escape liability that way.

If you're the one selling commercial property and yoususpect it may be contaminated, don't ignore it. The old rulewas "buyer beware," which meant it was the buyer'sresponsibility to discover any problems. In recent years, however,courts have ruled that sellers have to disclose information aboutcontamination if they knew about it or should have known about it.So investigate and clean it up or at least inform the buyer. It canbe difficult to sell property with environmental problems, buthiding them could be worse.

If there's a minor problem on your property, check with yourstate's EPA to see if there's a fund to help with the costof cleanup. Most states have one, supported by a fuel shipmenttax.

The problem of soil and water contamination will plague ournation for generations. Some major corporations are making inroadsby knowingly buying abandoned industrial brownfields andrehabilitating them. Perhaps Congress will create laws to encouragesuch efforts and protect those who want to make the most of theland. In the meantime, be very careful when you buy property tomake sure you don't buy an environmental disaster.