The Leasing Hotline

NEGLIGENT CONTAMINATION

Summary judgment may be denied where a reasonable trier of fact may find that the tenant was responsible for certain environmental reports and documentation, even though the lease does not specifically require it. Jaasma v. Shell Oil Company, No. 04-2095, U.S. Court of Appeals for the Third Circuit, June 28, 2005.

The landlord leased commercial premises to the tenant, who had been operating a gas station on the premises since 1961. The lease terminated on Oct. 31, 2001 and required that the tenant return the property to its original state. However, after the tenant vacated the premises, the landlord discovered certain environmental problems associated with the property that prevented the landlord from selling the property at fair market value. The landlord commenced an action against the tenant, claiming breach of lease and negligent contamination of the property. The district court granted summary judgment to the tenant, holding that as a matter of law, the market value of the property was not diminished. The court of appeals reversed. It held that although the lease did not specifically require the tenant to do so, a reasonable trier of fact could find that the tenant had breached the lease by failing to provide all necessary environmental reports to the state authorities because the lease required the tenant to comply with all applicable environmental laws. The court further considered that in light of the parties' course of conduct, it would be reasonable for the trier of fact to conclude that the tenant was responsible for dealing with all state environmental regulatory procedures.