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Compliance: Examining tenant liability for pre-existing contamination

The 4th Circuit's ruling in Ashley II held current tenant liable as an operator because it redistributed the pre-existing contamination

Conventional wisdom within the real estate community holds that tenants are not liable for remediating contamination under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) unless the tenant actually caused the contamination. Tenants are rarely advised to perform environmental site assessments, even of industrial properties, in the belief that tenants cannot be liable for pre-existing contamination. While that assumption has always been inaccurate, a recent court decision may motivate tenants to assess properties more carefully in the event they could be held liable under CERCLA.

In April 2013, the 4th Circuit Court of Appeals held in PCS Nitrogen Inc. v. Ashley II of Charleston LLC that a current tenant was liable not only for contamination that pre-existed the leasehold, but also for contamination on adjacent property owned by its lessor that was outside of its leasehold. Such an extraordinary expansion of CERCLA liability in this case requires tenants’ counsel to rethink the previously accepted conventional wisdom that their clients cannot be held liable for pre-existing contamination.

Contributing Author

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David L. Rieser

David L. Rieser, special counsel in the Environmental, Regulatory and Redevelopment Law practice at Chicago-based Much Shelist, has over three decades of experience advising...

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