NJDEP Won’t Save Buyers

Scales of JusticeIn a case recently decided by the New Jersey Superior Court, Appellate Division, the Court rejected the assertion of a buyer of real property that the NJDEP should be ordered to require the seller of contaminated property to complete the cleanup on a more expedited basis.  See CD&L Realty v. State of New Jersey, Department of Environmental Protection,  Docket No. A-4066-13T3, decided July 30, 2015.

The contract between the buyer and seller had required the seller to continue to remediate the property after the sale but expressly stated that, as between the buyer and seller, the seller would retain all decision making as to the remediation and would be the sole party to negotiate with the NJDEP.  Prior to the transaction, the seller had entered into an Administrative Consent Order (ACO) with the NJDEP agreeing to complete the cleanup, but the buyer was not a party to that ACO and, thus, had no direct means to seek its enforcement.  More than 13 years after the buyer acquired title to the property, the remediation was still ongoing.  Growing tired of the delays and alleging other problems with the manner in which the seller was performing the remediation, the buyer sued the NJDEP to compel the agency to require the seller to expedite the cleanup and  correct other perceived problems.

The trial court granted the NJDEP’s motion to dismiss.  Among other rulings, it held that in this case the NJDEP’s authority was discretionary and not ministerial, thereby precluding the relief sought by the plaintiff.  On appeal, the Appellate Division held that the trial court had been correct that the NJDEP’s authority was discretionary, thereby precluding issuance of a writ of mandamus.   However, the appellate court also ruled that, given the ongoing cleanup, the dismissal should be without prejudice rather than with prejudice.

The decision is a reminder that the courts and administrative authorities will not save a party to real estate transaction from a contract that does not protect its interests.  Sellers of contaminated property typically want wide rein in deciding how to do a cleanup and the time frames in which to accomplish it.  They will resist contractual language that requires specific deadlines to be met or that even provides that the cleanup must be performed expeditiously.  During the course of time, the seller may go out of business, the buyer may want to sell the property, and other events may occur.  These issues may not be apparent at the time of purchase, but delay does not work in favor of the buyer.

The decision to buy a contaminated property  is one that involves the balancing of  competing factors, including the price and other savings to the buyer in purchasing a contaminated property instead of a clean site, the utility of the property for the buyer’s needs, and the ability and willingness of the seller to satisfy its obligations.  Buyers should think carefully about whether they want to leave important decisions concerning the property in the hands of the former owner, especially when the process of remediation may span decades.  Contractual language can be employed which obligates  the seller to carry out the cleanup, but gives enhanced decision making to buyers and imposes tighter deadlines for the completion of the remediation.

Questions? Let Mitchell know.

Mitchell Kizner of Flaster Greenberg

Mitchell Kizner is a New Jersey focused attorney in Flaster Greenberg PC’s Litigation and Environmental Law departments. He represents clients in insurance, environmental, construction and other commercial matters as part of his active litigation and commercial law practice. He is also General Counsel to the firm. He can be reached at mitchell.kizner@flastergreenberg.com or 856.382.2247.