Residential Liability Policy

For properties included within the boundaries of state and federal Superfund sites, the following policies lend clarification to liability concerns. The Environmental Protection Agency (EPA) and the Arizona Department of Environmental Quality (ADEQ) maintain a policy of not requiring residential homeowners to perform or pay for cleanup actions at state or federal Superfund sites. Homeowners may be held liable for cleanup where their own actions have led to a release or threatened release of hazardous substances requiring a cleanup of their property, or where the property is used for non-residential purposes. This policy is designed to alleviate concerns about cleanup liability for homeowners, as well as parties involved in real estate transactions, such as lenders and title insurers.

This information was adapted from the EPA Publication 9230.0-23FS, "Homeowners Exempted From Cleanup Costs,"; dated November 1991, and Arizona Revised Statutes (ARS) § 49-283 (B) (see below).

ARS § 49-283 (B) Notwithstanding the provisions of subsection A, a person that owns real property is not a responsible party if there is a release or threatened release of a hazardous substance from a facility in or on the property unless one or more of the following applies to that person:

1. Was engaged in the business of generating, transporting, storing, treating or disposing of a hazardous substance at the facility or disposing of waste at the facility, or knowingly permitted others to engage in such a business at the facility.
2. Permitted any person to use the facility for disposal of a hazardous substance.
3. Knew or reasonably should have known that a hazardous substance was located in or on the facility at the time right, title or interest in the property was first acquired by the person and engaged in conduct by which he associated himself with the release. For the purpose of this paragraph, a written warranty, representation or undertaking, which is set forth in an instrument conveying any right, title or interest in the real property and which is executed by the person conveying the right, title or interest, or which is set forth in any memorandum of any such instrument executed for the purpose of recording, is admissible as evidence of whether the person acquiring any right, title or interest in the real property knew or reasonably should have known that a hazardous substance was located in or on the facility. For purposes of this paragraph, "associated himself with the release" means having actual knowledge of the release and taking action or failing to take action that the person is authorized to take and that increases the volume or toxicity of the hazardous substance that has been released.
4. Took action which significantly contributed to the release after he knew or reasonably should have known that a hazardous substance was located in or on the facility.

ARS § 49-283 (C) Any liability which accrues to an owner of real property under this section does not accrue to any other person who is not an owner of the real property merely because the other person holds some right, title or interest in the real property. An owner of real property on which a public utility easement is located is not a responsible party with respect to any release caused by any act or omission of the public utility which holds the easement in carrying out the specific use for which the easement was granted.

ARS § 49-283 (D) person otherwise deemed a responsible party is not liable under this article if he can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the resulting damages were caused solely by:

1. An act of God.
2. An act of war.
3. An act or omission of a third party, whether lawful or unlawful including acts of vandalism or unlawful disposal of hazardous waste or hazardous substances, other than an employee or agent of that person or other than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with that person, unless the sole contractual arrangement arises from a published tariff and acceptance for carriage by a common carrier by rail, if that person establishes by a preponderance of the evidence that:

(a) He exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of the hazardous substance in light of all relevant facts and circumstances.
(b) He took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions.

4. A release or threatened release which was subject to limits or conditions in a federal permit or a state permit relating to the protection of public health or the environment and the operation of the releasing facility has been and is in compliance with applicable limits or conditions.
5. The application of a pesticide product registered under the federal insecticide, fungicide, and rodenticide act (61 Stat. 163) and applied according to label requirements.
6. Liability has been assumed by the federal postclosure liability fund established under 42 United States Code section 9607(k).
7. Any combination of paragraphs 1 through 6 of this subsection.

Off-Site Migration Liability Policy

In general, the EPA will not take action to compel such property owners to perform cleanups or to reimburse the agency for cleanup costs where contamination to their property was caused solely by migration of contaminants from other property.

This information was adapted from the U.S. EPA Publication, Policy Toward Owners of Property Containing Contaminated Aquifers, November, 1995.

Under Arizona law, a person is not responsible for a hazardous substance that is located on or beneath the property if the hazardous substance that is located on or beneath the property is present solely because it migrated from property that is not owned or occupied by that person.

This statement adapted from ARS § 49-283.E.

ARS § 49-283 (E) A person is not a responsible party with respect to a hazardous substance that is located on or beneath property that is owned or occupied by that person if the hazardous substance is present solely because it migrated from property that is not owned or occupied by that person and that person is not otherwise a responsible party as prescribed by subsection A, paragraph 2 or 3.

Lender Liability

ARS § 49-283 (H) A person who maintains indicia of ownership in a property primarily to protect a security interest in a facility and who does not participate in the management of the facility is not liable as an owner or operator of that facility pursuant to this section. This subsection does not apply to a person who does any of the following:

1. Through intentional misconduct or gross negligence causes, contributes to or aggravates the release of a hazardous substance.
2. Fails to disclose to the facility's purchaser the known presence of a release or a threatened release of a hazardous substance at the time of sale or divestiture of the facility or the security interest in the facility.
3. Fails to obtain a phase I environmental assessment of the facility that complies with standards adopted by rule pursuant to subsection K of this section at the time of or at a reasonable time before foreclosure. This paragraph does not apply to residential properties with fewer than five residential units.
4. Fails to do any of the following after acquiring ownership of the facility:
   1. Provide the department reasonable access so that the necessary remedial actions may be conducted.
   2. Undertake reasonable steps to control access to the area of known presence of a release of a hazardous substance to protect the public health and welfare and the environment.
   3. Act diligently to sell or otherwise divest the property within two years of the lender's possession or ownership, whichever is earlier.

ARS § 49-283 (I) A fiduciary is not personally liable as an owner or operator pursuant to this section. This section does not preclude claims against assets held in an estate, a trust or other fiduciary capacity for the release or a threatened release of a hazardous substance from one of the assets. This section does not apply if either of the following apply:

1. A fiduciary through intentional misconduct or gross negligence causes, aggravates or contributes to the release or threatened release of hazardous substances or permits others to do so, except that a fiduciary shall not be liable for the intentional misconduct or gross negligence of any nonemployee agent or independent contractor if the fiduciary has not specifically directed the nonemployee agent or independent contractor to perform the grossly negligent act or engage in the intentional misconduct.
2. The appointment of the fiduciary is for the purpose of avoiding liability under this article. It is prima facie evidence that the fiduciary was appointed to avoid liability under this article if the facility is the only substantial asset in the fiduciary estate.

ARS § 49-283 (J) Subsections F, G, H and I shall not be construed to affect the liability of any person who is otherwise liable with respect to the release or threat of release pursuant to this section.

ARS § 49-283 (L) A fiduciary may not be a fiduciary and grantor of the same fiduciary estate.

ARS § 49-283 (O) For purposes of this section:

1. "Fiduciary" means:
   1. A trust company or bank certified or authorized to engage in the trust business pursuant to title 6, chapter 8, article 1.
   2. Any person appointed by a court or testamentary act to act as personal representative, executor, trustee, administrator, guardian, conservator, receiver or trustee in bankruptcy.
   3. Any person acting as a trustee of a deed of trust pursuant to section 33-803.
   4. Any person acting as a trustee pursuant to title 14, chapter 7.
   5. Any person acting pursuant to and subject to fiduciary obligations under the employee retirement income security act of 1974 (29 United States Code sections 1101 through 1114).
2. "Indicia of ownership" means legal or equitable title that has been acquired through or is incident to the default of a borrower.