Frequently Asked Questions Regarding UECA

EXISTING LAW:  My state already has a statute and/or regulations to deal with site cleanups, contamination liability, and institutional controls, and it seems to be working well.   Why would we need a statute like UECA?

It is important to understand that UECA is designed to provide states with an effective tool to help ensure the long-term reliability of institutional controls.  It does not specify what those controls should be, what cleanup level is appropriate, or whether a responsible party should be released from cleanup liability – all of those primary decisions are left to other law.   However, when an agency approves a remediation plan, and determines that a long-term controls need to be placed on that property, UECA helps ensure that those controls will not be extinguished by the unexpected operation of various common law doctrines and statutory impediments arising out of the law of real property.

UECA is not intended to displace existing state law, and in most cases can be easily integrated into a state’s existing statutory framework.  A state agency and the private party responsible for a cleanup both have a strong interest in ensuring that institutional controls are maintained as long as necessary to protect human health and surrounding property (and in the case of responsible parties, to avoid the risk of exposure to future cleanup or other liability which might result from the accidental or intentional failure of necessary controls).

The act is the result of several years of intensive drafting meetings which featured the active participation of representative of the US EPA, state environmental agencies, local and municipal governments and redevelopment agencies, bankers, title companies, state Attorneys General, bar associations, DOD, US DOE, land trusts, and environmentalists.   Most importantly, the UECA effort brought nationally-prominent environmental law specialists together with some of the leading real property experts in the country.   This multi-disciplinary expertise is a key source of UECA’s value for the states, including states which already have well developed remediation statutes, because in most cases even the best of the existing statutes fail to address a number of real-world, real property problems.

Consider:

If your state does not use real-property based activity and use limitations  (i.e. controls that “run with the land” and are recorded in the title records) how can subsequent innocent purchasers (and their tenants) be prevented from violating or removing controls?   If the existing system depends on required notices to and/or release from subsequent purchasers, what happens if those notices don’t go out?  Can the violation of a control lead to revived liability for the original owner/responsible party?

If your state does use real-property based activity and use limitations  (i.e. controls that “run with the land” and are recorded in the title records), what would happen if:

• A mortgage recorded prior to the clean-up restriction (regardless of whether it is called an easement, servitude, covenant, or other term) is foreclosed?    Unless the common law of your state has been expressly changed or superseded by statute or later caselaw, such a foreclosure would almost always extinguish the recorded use restriction.  UECA address this problem (and the problem of other prior recorded interests such as utility and road easements).

• A use restriction is challenged because it failed to meet any of the following required elements of an interest that runs with the land under traditional real property law:

o        it is not appurtenant to an interest in real property;

o        it can be or has been assigned to a person other than the original holder;

o        it is not of a character that has been recognized traditionally at common law;

o        it imposes a negative burden; 

o        it imposes an affirmative obligation on a person having an interest in the real property or on the holder;

o        the benefit or burden does not touch or concern real property;

o        there is no privity of estate or contract;

o        the holder of the enforcement right dies, ceases to exist, resigns, or is replaced; or

o        the owner of an interest subject to the environmental covenant and the holder are the same person.

• A local government or redevelopment agency decides to changes its zoning law, exercise its eminent domain power, or foreclose on a tax lien with respect to the property.

• The institutional controls (i.e. a concrete cap, a monitoring requirement, or a prohibition on use of a well) for a particular property need to remain in place for at least 60 years, but your state has a marketable title or dormant mineral interest statute that automatically extinguishes non-fee interests after 40 years.

Does your state agency have the authority to take interests in real property?  If it is the only party able to enforce a use restriction/servitude, it likely *is* taking an interest in real property.   UECA handles this issue through the use of a third-party enforcer concept called a ‘holder’ and additional statutory rules making it clear that an agency does not take a real property interest merely by being a party to a covenant.

If the state environmental protection agency is the only entity that can enforce the terms of a title-based use restriction under current law, what happens decades after a cleanup is approved if the relevant site monitoring budget is exhausted or eliminated?  If additional parties with an interest in protecting the controls (local governments, parties facing the possible revival of liability, nonprofit environmental groups, insurers, etc.) also had the ability to seek enforcement, wouldn’t this be better in the long run?

Because an environmental regulatory agency *must* sign off on a covenant for it qualify under the act -- the agency retains the power to insist on what controls must be used, what reporting schedule must be followed, who should get notice of the controls and any proposed modifications, and basically any other factor or criteria already being used under existing law and regulation.  UECA is simply provides an additional mechanism for providing improved notice to future purchasers of the controls that need to be maintained on a parcel of real property, and more and flexible enforcement options for agencies and others with an interest is seeing that necessary controls are kept in place.   UECA does not displace existing substantive law on clean up standards or liability, and should be viewed as an important additional tool that can be used by agencies and others to provide reliable, long-term environmental land use controls.

PROPERTY OWNER RIGHTS: UECA confers on property owners who grant restrictive covenants on their property the right to enforce the covenants and requires their consent to any modification or termination of those covenants. My state does not require that we give property owners these rights. Won’t this provision hamstring my state agency by forcing the agency to find the holders of these rights in order to modify or terminate the covenant? What if the holders of these rights refuse to approve a modification or termination? 

UECA provides the property owner with the right to enforce the covenant because the property owner has an independent interest in having an environmental covenant enforced, not least of which is an interest to protect against future liability.   If the agency is unwilling or unable to enforce the covenant, the property owner should have the right to do so to avoid his potential liability for harm which might result from breaches of the controls mandated in the covenant. Allowing original property owners to enforce the covenant thereby ensures more reliable institutional controls than would otherwise exist. 

UECA includes a provision requiring the original property owner's (the grantor’s) consent to any modification or termination of the covenant because of a concern that the covenant could be made less stringent in the future, perhaps by a future owner or a more lenient agency, potentially to the detriment of the original property owner and the public. This problem can be avoided by including a provision in the covenant in which the original property owner waives his right to consent to modifications and/or terminations of the covenant, thereby eliminating the need for the future owner to track him or her down.  If not waived, the burden of finding the original property owner would be on the party seeking to modify or terminate the covenant, which is presumably a private party, not the agency.

If there is no provision in the covenant waiving an original owner’s right to enforce, modify, or terminate the covenant, the state agency still has power to compel the original owner to comply. In these situations, a modification to the covenant is most likely needed because the agency decides an environmental remediation underlying the covenant needs to be more restrictive. Here, the state agency would still possess its regulatory enforcement power under the applicable state or federal environmental law, assuming that the owner is also a liable party under that law, as the owner typically would be. The state agency should weigh the possibility of future non-compliance by the original property owner when and if the agency considers granting liability relief to such an owner under existing state law.

MORTGAGE FORECLOSURES: UECA allows a holder of a mortgage who acquired its interest before the environmental covenant was created to extinguish the environmental covenant by foreclosing on the mortgage. Won’t this require the state agency to identify all prior interests on a particular property, determine if those interests interfere with the environmental provisions of the covenant, and then seek a subordination agreement from the mortgage holder if those interests do conflict?

UECA does not impose any burden on the state agency to determine whether prior interests in the real property subject to the covenant exist. Instead, the burden would be on the private party seeking to implement an environmental covenant. Under current law, it is the right of a prior mortgage holder who is foreclosing on property to extinguish covenants created after the mortgage holder acquired the mortgage.  Traditional real property rules regarding prior recorded interests are not overturned by UECA – as a result, pre-existing prior valid and effective interests remain valid.   This result is consistent with existing law in every state (see § 7.1 of the Restatement (3d) of Property: Mortgages).   UECA is intended to allow the parties to a voluntary transaction to agree to long-term activity and use controls.   Mortgage holders have every interest in seeing a property cleaned up and returned to productive use, as this permits the property to have market value.

STATE AGENCY INTERESTS IN REAL PROPERTY: My State law makes state agency acceptance of interests in real property cumbersome or impossible.  Does my state law conflict with UECA?

An agency's rights under UECA and an environmental covenant, except when they act as a holder, are not interests in real property. Therefore, UECA may actually alleviate the burdens normally imposed on a state agency when rights relating to real property are acquired.  UECA explicitly states that the agencies interest in the covenant as a consequence of signing it or having a right to enforce its terms is *not* an interest in real property.  Please see the official comments to the act for further background on this issue.

LEGALLY SUFFICIENT DESCRIPTION OF PROPERTY: The Act requires that the covenant document contain a legally sufficient description of real property. Who certifies whether a description of a particular property is “legally sufficient”? What happens if the description is not “legally sufficient”?

Agreements relating to real property require a legally sufficient description of the real property at issue under state law. UECA does not modify this existing requirement; it merely assures that the environmental covenant complies with existing state law. Therefore, UECA will not change the existing law regarding when a description of real property is legally sufficient or the ramifications that follow from an insufficient description. This issue will rarely arise, as a “legally sufficient” description is a longstanding requirement that is well understood and followed within the real estate community.

ENVIRONMENTAL COVENANT REGISTRY: UECA allows for the creation of a registry for all environmental covenants and their amendments. My state does not have such a registry, and we have no funds for one. Must we adopt this registry? If we do adopt this registry, is an environmental covenant that is not registered enforceable? 

UECA left the creation of environmental covenant registries as an optional part of the Act; the decision to create a registry is left completely to the discretion of the state. Creating such a registry will facilitate the ability of interested parties to review the rights and obligations arising from environmental covenants, but it is not required.

UECA includes a provision allowing states to adopt environmental covenant registries partly in response to the 2001 amendments to Section 101 of CERCLA, which requires states to develop registries to track sites that are relying on environmental institutional controls. States that must create these registries already have the infrastructure in place to include environmental covenants adopted pursuant to UECA.

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 A registry created under this optional section could be self-funding, much like corporate records departments of most Secretaries of State offices and the land recording offices of most counties and municipalities are self-funding. For example, a bill in Maryland, a state which has already established a registry under CERCLA, might use an existing fee to expand the existing registry to include environmental covenants created under UECA.