As part of the Commonwealth of Kentucky Brownfield’s Initiative, the Commonwealth of Kentucky Legislature has recently passed new law that affords certain environmental protections to present owners or prospective purchasers of real property. KRS 224.1-415 addresses conditions which a property owner is not liable for remediating contamination at the real property.
The threat and scope of environmental liability is so great that one can actually be required to take timely and costly corrective action to remediate contamination that may not even have been caused by that individual or entity. The presence of contamination, or the perception that contamination exists, may significantly diminish the property’s value. This threat has thwarted many transactions.
The new law relieves the property owner, or a prospective purchaser of real property, from performing a site characterization, correcting the effects of the release of contamination, or performing corrective action, in part, if: (a) the release occurred prior to the property owner’s acquisition of the property; (b) property owner made appropriate inquiries into the previous ownership and uses of the property; (c) property owner has not contributed to the release of the contamination; and (d) property owner is not and has not been affiliated with anyone potentially liable for the release of the contamination.
The Commonwealth of Kentucky Energy and Environment Cabinet (“Cabinet”) has recently filed draft regulations providing the mechanisms in which one may procure the statutorily provided protections. The regulations may be finalized as early as February 2014. At present, the draft regulations require, in part,: (a) an application; (b) certification statement by the owner or buyer; and (c) a Property Management Plan (“PMP”) which must be certified by professional engineer or professional geologist. Present Cabinet guidance, which the draft regulations mostly mirror, sets forth that the PMP addresses, in part,: (a) intended and future uses of the property; (b) exposure pathway valuation; (c) construction management; (d) periodic inspections of the premises; and (e) change of condition.
If the application package submitted by the present or prospective owner is approved by the Cabinet, the Cabinet will issue what is called a “Notification of Concurrence”. The Notification of Concurrence is like a get out of jail free card offering liability protections as long as the property owner and the identified property are compliant with the new law and with the PMP.
Prior to the promulgation of this legislation, one may have taken certain steps in the hope that they would qualify for the Innocent Landowner or the Bone Fide Prospective Purchaser defenses to liability for contamination. These defenses had to be affirmatively proven and only could be achieved by those who took the appropriate action prior to the purchase of the real property. A property owner could not, post purchase, take action to allow them to take advantage of those defenses.
Now, the issuance of a Notification of Concurrence evidences that the Cabinet is in agreement that the actions taken were satisfactory as long as the information provided was true and the application package met with Cabinet approval. Most significant and interesting about the new law is that a present owner of real property may also come under the umbrella of protection provided by the new law after the purchase of real property if they did not contribute to the contamination. Failure to take the necessary action prior to the purchase of the property may not now be a bar to liability protection under this Kentucky law. Many companies and individuals are investigating this new opportunity to put them in a better position.
Present owners and prospective purchasers of real property should take advantage of the new law. The defenses afford another layer of protection from liability. One should consider shepherding an application package through the process to procure a Notification of Concurrence.