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Environmental Issues in Leasing Transactions
Due to the potential for extraordinary liability associated with contamination problems, landlords and tenants in commercial leasing transactions should address environmental concerns in the leasing documents. Subsurface contamination involving soil and groundwater concerns could result in substantial costs and liabilities for both parties. In addition, asbestos can present unique issues for both the landlord and the tenant. The landlord should be concerned that the tenant's operations will result in the contamination of the premises. The tenant should be concerned that existing contamination, whether soil, groundwater, the presence of asbestos, or other problems, could present liability issues for itself.
Environmental liability may be imposed under a number of federal, state, and local laws, including common law principles. However, environmental liability stems mainly from the federal Comprehensive Environmental Response Compensation and Liability Act (CERCLA), also known as Superfund. Under CERCLA, the present and prior owner or operator of property contaminated with hazardous substances may be held strictly liable for cleanup costs. The defenses under CERCLA are limited. In accordance with CERCLA liability, the owner could be liable for the tenants' resulting contamination. Similarly, tenants are concerned that, as an operator under CERCLA, they could be held liable. It must be noted that there is very limited case law under CERCLA holding a tenant liable where the tenant did not cause the contamination.
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