Environmental Alert: CERCLA: Lender Liability for Environmental Issues

Lenders often confront liability concerns when dealing with foreclosure options on an environmentally contaminated property in which the lender holds a security interest. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the EPA can require liable parties to conduct cleanup activities or the EPA itself can conduct the cleanup activities and seek reimbursement from liable parties.  Potentially liable parties generally include any owner or operator of the property in question or any party that arranges for disposal or treatment of hazardous substances at the property.  Courts have interpreted the owner and operator designations very broadly.  Specific to lenders, however, CERCLA Section 101(20) contains a secured creditor exemption that eliminates owner/operator liability for lenders who hold ownership in a CERCLA facility as a result of foreclosing on their security interest in that facility.  

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