DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING...

38
DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman & Blumenthal, L.L.P. April 27, 2000

Transcript of DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING...

Page 1: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

DISCLOSURE OBLIGATIONS AND

REPORTING REQUIREMENTS FOR ENVIRONMENTAL

CONTAMINATION

Sally A. LongroyCarrington, Coleman,

Sloman & Blumenthal, L.L.P.April 27, 2000

Page 2: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman
Page 3: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Why does the Presence of Environmental Contamination Matter??

• Depresses Property Value►Liability Risk►Potential cleanup costs

• Increased Transaction Costs

Page 4: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Buyer’s and Seller’s Conflict

Page 5: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Buyer’s and Seller’s Conflict

Liability

Page 6: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Statutory Disclosure Obligations

• Residential Property Condition►Improved Property

▪Statutory form at Exhibit A►Unimproved Property

▪ Pipeline location▪ Hazardous substances

Page 7: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Statutory Disclosure Obligations

• Residential Property Owner’s Association• Rollback Tax Notice for Vacant Land• Lead-based Paint• Underground Storage Tanks• MSWLFs

Page 8: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Hidden Treasures

Page 9: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Curt Mudgeon

Page 10: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Hidden Treasures – “Before”

Page 11: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Hidden Treasures – “After”

Page 12: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Ida Listic

Page 13: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Seller’s Broker -Clu Lesascanby

Page 14: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

The Fairatharts

Drew Lee

Page 15: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Fairatharts’ Environmental Consultant -Dr. Kent Findit

Page 16: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Fraudulent Misrepresentation

• Elements►Material representation► False► Known false or recklessly without knowledge► Intention for reliance► Action in reliance► Injury

Page 17: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Fraudulent MisrepresentationNon-disclosure

• Additional Element► Sellers duty to disclose

▪Defect not discoverable by exercise of ordinary care▪ Confidential/fiduciary relationship between buyer and seller

Page 18: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Fraudulent MisrepresentationFraudulent Concealment

• Additional Element► Seller had actual knowledge of

acts concealed and fixed purpose to conceal the wrong

Page 19: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Remedies for Fraudulent Misrepresentation

•Actual Damages►Out of pocket►Benefit of the bargain

•Special/Consequential Damages•Rescission•Punitive

Page 20: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Negligent Misrepresentation

•Elements►Business transaction►False representation►Negligence►Reliance►Monetary damages

Page 21: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Remedies for Negligent Misrepresentation

•Pecuniary loss

Page 22: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

DTPA

• Broad protection for consumers from false and misleading acts

• No reliance required• Few defenses• Remedies include attorneys

fees and treble damages

Page 23: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Fraud in Real Estate and Stock Transactions Act

• Elements►False representation

▪Intended to induce▪Reliance

Page 24: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Tort Risk From Nondisclosure

Fraud in Real Estate and Stock Transactions Act

•Remedies►Benefit of bargain or out of pocket damages►Rescission►Exemplary damages - if actual awareness of falsity or failure to disclose falsity of representation

Page 25: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

How Does a Seller Avoid Nondisclosure Risk?

Page 26: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Avoiding Nondisclosure Risks

Disclose When:

•Statute or Rule Requires•Known Material Defect•Constructive Knowledge of Material Defect•Defect Not Reasonably Discoverable•Confidential Relationship

Page 27: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Allocating Nondisclosure RiskThe "As Is" Clause to the Rescue?

• Sale made with all latent and patent defects, and without representations or warranties

• Parties are free to contract -allocate environmental liabilities

Page 28: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Allocating Nondisclosure Risk

Maybe not . . .

• May be invalid if fraudulently induced

• Must disclose facts not reasonably discoverable

Page 29: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

CERCLA LiabilityThe Innocent Landowner Defense

• Buyer has no reason to know of release or threatened release of hazardous substances on the property

• Buyer has undertaken all appropriate inquiry

Page 30: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting Obligations

Discovery of a Release

•Obligations Burden Owners•Discovery may trigger statutory requirements

Page 31: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting Obligations

Discovery of a Release

• From Storage Tank Systems►Must report within 24 hours of discovery of

suspected or confirmed release• Non-Tank Releases

►Governed by Texas Water Code § 26.039

Page 32: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting Obligations

Discovery of a Release - § 26.039

“Whenever an accidental discharge or spill occurs from any activity or facility which causes or may cause pollution, the individual operating, in charge of, or responsible for the activity or facility shall notify the Commission as soon as possible and not later than 24 hours after the occurrence.”

Page 33: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting Obligations

Discovery of a Release - § 26.039

“Accidental Discharge”

“act or omission through which waste or other substances are inadvertently discharged into water of the state.”

Page 34: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting ObligationsDiscovery of a Release - § 26.039

“To Discharge”

“To deposit, conduct, drain, emit, throw, run, allow to seep, or otherwise release or dispose of or to allow, permit or suffer any of these acts or omissions.”

Page 35: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting ObligationsDiscovery of a Release - § 26.039

“Spill”

“An act or omission through which waste or other substances are deposited where, unless controlled or removed, they will drain, seep, run or otherwise enter water in the state.”

Page 36: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting ObligationsDiscovery of a Release - § 26.039

“Other Substances”

those “which will cause pollution”if discharged into water.

Page 37: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman

Reporting ObligationsDiscovery of a Release - § 26.039

“Pollution”

“the alteration of the physical, thermal, chemical, or biological quality of, or the contamination of, any water in the state that renders the water harmful, detrimental, or injurious to humans, animal life, vegetation, or property or to public health, safety, or welfare, or impairs the usefulness or the public enjoyment of the water for any lawful or reasonable purpose.”

Page 38: DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS … · DISCLOSURE OBLIGATIONS AND REPORTING REQUIREMENTS FOR ENVIRONMENTAL CONTAMINATION Sally A. Longroy Carrington, Coleman, Sloman