Posted on July 18, 2008 by Jarred O. Taylor, II
Alabama joined a number of other states dealing with environmental covenants when it enacted the Alabama Uniform Environmental Covenants Act, effective January 1, 2008. Ala. Code§35-19-1 et seq. (“Act”).The Alabama Department of Environmental Management (“ADEM”) has been working on implementing regulations, which are expected to mimic the Act and be released in the next few months. ADEM will also charge a fee for implementation and oversight of the program and covenants.
For those not familiar with the concept, in many situations environmental contamination cannot be completely addressed by total removal (clean closure) of the offending soil or remediation of the groundwater to a level allowed for unrestricted use. Some amount or concentration of contamination must be left behind. In those situations, EPA and ADEM will require additional measures, such as land use controls or continuing monitoring and maintenance. The idea is that if property has contamination on it unsuitable for a residential housing development or the construction of a school, those interested in buying or developing the property are put on notice of the limit of the property to commercial or industrial use. These controls and obligations are often embodied in deed restrictions or recorded declarations which could be terminated by various common law mechanisms; therefore, the Uniform Environmental Covenants Act was created to provide a mechanism by which environmental covenants and land use restrictions survive the potential fatal operations of the common law. States were encouraged to adopt the uniform act, and Alabama has now done so.
An “Environmental Covenant” is defined as “[a] servitude arising under an environmental response project that imposes activity and use limitations.” Ala. Code § 35-19-2(5). Such “environmental response projects” can arise under state or federal hazardous waste cleanup laws, such as CERCLA, RCRA, or Alabama’s version of brownfields.
Before the Act was passed, ADEM still required a restrictive covenant or deed of some kind when contaminants were being left behind, but it was never sure what might happen to the restriction upon a subsequent sale of the property because it had no enforcement authority. If the property changed hands several times, there was no manner by which ADEM could require the Seller and the Buyer to maintain that restriction as a part of the sale. With the Act, there is a “holder” of the covenant which can enforce the covenant, and ADEM has enforcement power even if it is not a holder. A holder can be any person, a governmental agency (such as ADEM), an environmental group, or a unit of local government. The interest of a holder is considered to be an interest in real property; however, the Department’s interest in a covenant, unless it becomes a holder, will not be considered to be an interest in real property. There are certain elements that each covenant must meet in order to be effective, and those are clearly set out in the Act. Importantly, each environmental covenant requires at least one holder, and a holder can be the fee simple owner and/or the grantor of the covenant.
If, at the time an environmental covenant is recorded or registered, the Act does not abrogate the common-law doctrine of “first in time, first in right” as it relates to prior and valid property interests. If there are other interests in the subject real property with priority over the covenant, unless the prior interest in the property is made subordinate to the covenant by the owner of such interest, then the prior interest is not affected.
The grantor of an environmental covenant has a statutory responsibility to notify certain persons or entities of the covenant. Specifically, the grantor must provide a copy of the covenant to (i) each person signing the covenant; (ii) each person with a “recorded interest” in the subject property; (iii) each tenant or person in possession of the subject property; and (iv) each county or municipality in which the real property is located (normally the county or municipal office where deeds are recorded, such as the probate office). You also have the option of filing the covenant with ADEM (it keeps a registry), and then filing a notice with the county probate office in lieu of the entire covenant.
Environmental covenants are perpetual although there are exceptions set out in the Act, such as if the covenant itself has a specified length of time, a condition allowing termination is satisfied, or a court is petitioned for its modification. Of course, one always has the option of conducting additional remediation of the property to reach unrestricted use standards, which would then allow for termination of the covenant.
The author wishes to acknowledge the contributions made to this article by Bryan Nichols of Maynard, Cooper & Gale, P.C.