Fix it and forget it? No way…. don’t rely on a punchlist

21 Mar 2012

I’ve seen buyers put together their post-closing “punch list” which sits on a shelf forever. Two recent decisions reflect the need both for good lawyers and good follow-up by property owners – because no one in the government is going to do it for you.

In one case, in 1998, an older couple, the Kudingers, sold land with underground storage tanks (USTs) and contamination to a developer. The purchase agreement required the Kudingers to clean it up. They hired a consultant and did a cleanup but the consultant never asked the MDEQ to designate the property as “closed.”  Mrs. Kudinger died in 2002; her husband died in 2006 and the developer never checked on the closure.  When the developer tried to refinance in 2007, it found out the hard way that the property was still listed as “open” and it wound up costing another $77,000 to close it.

The trial court and court of appeals focused on the fact that the contacts with the Kudingers did not include a time for performance. Both courts agreed that, without an explicit time, the courts should imply a reasonable time for performance.

Cleanups tend to be complicated and difficult to predict and this case highlights the need for careful drafting and for diligent follow-up. Assuming no news is good news is not the right approach

A Federal court also recently resolved a dispute (here) between a shopping center owner (landlord) and its former tenant (Goodyear).  After a lawsuit had begun over the cleanup, Goodyear (unbeknownst to its landlord) asked the MDEQ to approve its cleanup by granting it a no further action NFA letter.

The Court rejected landlord’s challenge to the NFA as not an improper use of legal process and to MDEQ’s granting of it as not illegal.  Ultimately, it doesn’t appear that the NFA prevents landlord’s lawsuit, but the NFA may make the fight harder and it highlights the landlord’s failure to monitor its tenant’s activities.

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