LANDLORD LIABILITY FOR TENANT’S HAZARDOUS MATERIALS
Most property owners in California are generally aware that Proposition 65 and certain other statutory schemes impose notice requirements on Landlord where conditions on their properties result in exposure by individuals hazardous materials or to chemicals identified by the State of California as known to cause cancer or reproductive toxicity. For example, if a building contains asbestos or asbestos-containing materials or lead based paint, Landlord is obligated to notify the tenant of such presence before a lease transaction is consummated. Failure to disclose can result in damages suffered by persons harmed, as well as possible civil penalties.
Similarly, if a tenant knows or has reasonable cause to believe that hazardous materials have been released within or from its premises, it is obligated to disclose such release in writing to its landlord and to others affected. Failure of a tenant to provide such notice constitutes a material breach of the lease, giving the landlord a right to terminate, as well as to recover its damages.
Most commercial leases are clear as to the limitations imposed on a tenant’s ability to handle hazardous materials, as well as the respective disclosure obligations of landlords and tenants. In addition, most commercial leases include indemnity provisions intending to protect one party from the other party’s use, storage or disposition of hazardous materials. Unfortunately, it is not uncommon for tenants to breach such lease provisions, and leave hazardous materials in the premises after the lease terminates and the tenant vacates. In such event, it becomes the landlord’s problem, a problem exacerbated if the tenant is no longer solvent, in business or even locatable.
The federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) imposes strict liability, or liability without fault, for environmental contamination on “owners and operators” of facilities. The federal Resource Conservation and Recovery Act (“RCRA”) imposes liability without regard to fault on owners of property which contained stored gasoline, and such storage containers leaked into the soil and groundwater. These federal statutory schemes and companion state provisions obligate landlords faced with taking possession of premises with hazardous materials to, among other things, notify applicable governmental agencies, notify other tenants that may be affected by the presence, remove the materials and dispose of them in compliance with applicable law, and remediate any damages caused by such presence.
It is not unusual for commercial leases to grant landlords the right to come onto the leased premises to conduct investigations and inspections to confirm that hazardous materials are being stored, handled and disposed of prudently and in compliance with applicable law. Absent such express provisions, case law in California has established the right of landlords to conduct such inspections and testing “in a reasonable and nonobstructive manner.” Sachs v. Exxon, (1992) 9 Cal. App. 4th 1491, 1498.
In the unfortunate circumstance of a landlord left with the problem, recognizing CERCLA’s encouragement of early resolution and settlement between responsible parties and environmental regulators, the most prudent alternative for the landlord may be to notify all persons that may be affected, including the applicable governmental authorities, to work with those authorities and licensed environmental contractors to dispose of the hazardous materials, and to remediate any contamination in an effort to contain and limit damages.
VIEWS EXPRESSED ARE THE PERSONAL VIEWS OF THE AUTHOR AND DO NOT REPRESENT THE VIEWS OF ROBERT THORNBURGH, KIDDER MATHEWS, LOCKE LORD LLP, ITS PARTNERS, EMPLOYEES OR ITS CLIENTS. FURTHERMORE, THE INFORMATION PROVIDED BY THE AUTHOR IS NOT INTENDED TO BE LEGAL ADVICE AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP.
