New Jersey Spill Act: Innocent Purchaser Defense

December 28, 2012 | No Comments
Posted by Steven M. Dalton

Landowners seeking to avoid liability under the New Jersey Spill Act for prior discharges of hazardous substances can attempt to do so by affirmatively establishing the elements of the “innocent purchaser” defense.  Establishing “innocence” depends in large part on meeting due diligence requirements to establish that “all appropriate inquiry” into prior ownership and uses of the property was made before acquisition.  If an owner knew of a discharge of hazardous substances and did nothing or should have known, but did not because the owner failed to conduct an appropriate inquiry, the defense is defeated.

The Spill Act distinguishes between land acquired before and after September 14, 1993 in the context of the defense.  The date is critical in determining the level of due diligence required to establish that “all appropriate inquiry” occurred before property acquisition.  The Appellate Division of Superior Court recently discussed the distinction between pre and post-September 14, 1993 property acquisitions in NJ Schools Development Authority v. Marcantuone.  The case was remanded to the trial court for a factual determination of whether the property owner’s due diligence was in accord with “generally accepted good and customary standards” at the time of acquisition, which is the requirement for property acquired before September 14, 1993.  In contrast, for property acquired after September 14, 1993, the Spill Act provides that land owners must prior to acquisition conduct a preliminary assessment and, if necessary, a site investigation in accordance with DEP’s regulations.

The critical issue for owners of land acquired both before and after September 14, 1993 is the level of due diligence completed, as the other elements of the defense overlap.  The distinction is based on statutory amendments that occurred in 1993 and the initial 1993 effective dates of applicable DEP regulations dictating requirements for environmental investigation of real property.  Though nearly 20-years removed, Marcantuone demonstrates that situations still may arise where the more amorphous “good and customary practices” standard is used to evaluate the sufficiency of due diligence in the context of the innocent purchaser defense.

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