4 Tips for Buying A House in the Country

By Liam Sherlock

If you buy a residential property in a city or town, it is generally easy to establish the allowed uses of the property, the lot boundaries, and the availability of city water, sewer, and utility services. But buying a rural residential property requires a prospective buyer to look into issues they may have never considered or encountered before. We’ve developed this checklist to assist clients who are considering purchasing a residential rural property.

Checklist for Buying a Rural Property

1. Boundary Lines

Property lines (or “boundary lines”) are the official delineations where one piece of land ends and the adjacent land begins. These are important to be aware of when purchasing any property, but especially in rural areas if you want to minimize future disputes. To determine boundary lines:

• Get a copy of the last recorded survey of the property.

• Talk to neighbors about boundary lines and their understanding of where their property ends, and your potential new property begins.

• Have a surveyor find corner points and be on the lookout for anything concerning, such as a misaligned fence.

2. Easements

An easement is a set of rights that give a person or entity the right to access someone else’s property for a particular purpose. Make sure all easements benefiting or burdening property are located and understood and establish who is responsible for easement maintenance.

3. Land Use

Understanding the permitted and prohibited uses for the rural property you are considering purchasing can be beneficial in avoiding future conflict. To gain a better understanding:

• Check with the appropriate county land planning department to ensure that all uses and structures on the property are allowed for the applicable zoning.

• Understand that adjacent farm or forest uses are generally protected by law from nuisance claims.

• Call the sheriff’s office and county land use enforcement officer to see if adjacent properties have any non-conforming or illegal activities reported (such as squatters or drug manufacturing).

• Establish that the property is within a defined rural fire protection district.

4. Property and House Inspections

If you have purchased any property in the past, you are likely familiar with home inspectors. Uncovering issues early on will allow you to make a more informed decision regarding the property purchase. Ensure your inspection includes the following:

• Have qualified pest/dry rot and whole house inspections for all significant structures.

• Ensure well water is tested for nitrates, bacteria, salt, and arsenic.

• Ensure the well produces at least five gallons per minute for four hours during the summer.

• Ensure the septic system is properly functioning and there is sufficient room on the property for a replacement drain field.

If your research uncovers a concerning issue from the above checklist, it is a good idea to consult with a knowledgeable attorney specializing in Land Use law. Our firm regularly assists clients in such matters. Book a consultation with us today!

The information provided here does not constitute legal advice. Hutchinson Cox makes neither express nor implied warranties regarding the use of this material. The reader should always seek competent legal advice as the facts of every case vary.

What Do I Do If I Discover a Hazardous Waste Spill at My Business in Oregon?

By Liam Sherlock

Leaks and spills of hazardous or regulated materials often start small but can quickly become an expensive nightmare, especially for a business that is not prepared for such an incident. The responsibility for cleanup lies with the person or entity who spills the product, as well as the person owning or having authority over the oil or hazardous material.

Do I Need to Report A Hazardous Waste Spill in Oregon?

The short answer is, yes. In Oregon, spills must be promptly reported to the Oregon Emergency Response System (OERS),) or the operator can face substantial fines for failure to comply.

In addition, the Department of Environmental Quality (DEQ) will hold you responsible for the immediate cleanup of your spill, regardless of the quantity involved. 

What Hazardous Waste Categories Must Be Reported? 

While this list does not include all potential types of hazardous waste spills that must be reported, if your spill matches one of the below categories, be sure to contact the OERS immediately:

• Any amount of oil to waters of the state

• Oil spills on land in excess of 42 gallons

• Hazardous materials such as solvents, pesticides, or gasoline that are equal to the Code of Federal Regulations, 40 CFR Part 302

What Information Do I need to Provide When Reporting A Hazardous Waste Spill? 

You will want to be prepared to answer the following questions when contacting the OERS to report your hazardous waste:

• Where is the spill?

• What spilled?

• How much spilled?

• How concentrated is the spilled material?

• Who spilled the material?

• Is anyone cleaning up the spill?

• Are there resource damages (e.g., dead fish or oiled birds)?

• Who is reporting the spill?

• How OERS or someone from DEQ can contact you?

What to Expect After Reporting A Hazardous Waste Spill

Once the spill has been reported and cleanup efforts are underway or completed, you will likely receive a letter from DEQ requesting a completed spill/release report form explaining the details of the spill as well as your efforts to 1) stop the spread of the spill, and 2) cleanup and dispose of the waste. 

The report and all supporting documentation must be mailed to the DEQ regional office specified in the request letter. State and Federal environmental authorities take their reporting requirements very seriously. It’s important to remember that insurance companies do not pay fines and penalties arising from failure to report spills or for late reporting. There are a number of actions you can take to reduce or mitigate the costs associated with spills.

Alternatives to Payment of Fines for Hazardous Waste Spills in Oregon

The DEQ offers a special enforcement settlement known as a Supplemental Environmental Project (SEP). An SEP arrangement can reduce the amount of a fine or penalty or at least make it less burdensome. SEPs are agreements between the DEQ and property owners and/or operators who are subject to a fine. Instead of paying a fine, they may instead be allowed to perform activities, such as a household hazardous waste collection event, or streamside restoration, that provide an increased level of environmental protection.

You can also challenge an official finding based on scientific evidence. This challenge can address the amount of material spilled, its environmental consequences, and the best way to remedy the problem. This approach can sometimes save you significant amounts of time and money.

Why Is It Important to Report Hazardous Waste Spills?

Often, only small amounts of hazardous materials are spilled, and under normal circumstances the fine would not be significant had it been reported. The problem—and a hefty penalty—can often arise from the failure to report. Avoid this costly situation by following the DEQ reporting requirements. 

After a spill, the best way to maintain a legally defensible position against a government agency or third-party claimant (and avoid being included as a responsible party to a pre-existing contamination problem) is to document every environmental release. Keeping detailed notes of all notification and mitigation actions taken after a spill will go a long way in alleviating liability exposure in both the short and long-term.

If you have encountered an issue with hazardous waste on your property, it can be helpful to work with an experienced land use lawyer to ensure you are in-the-know regarding your options. Book a consultation with us today!

The information provided here does not constitute legal advice. Hutchinson Cox makes neither express nor implied warranties regarding the use of this material. The reader should always seek competent legal advice as the facts of every case vary. 

A Real Estate Buyer’s Guide to Environmental Hazards

By Liam Sherlock

What you don't know about buying real estate can hurt you, especially your pocketbook. This axiom rings especially true if there has been a release of toxic or hazardous chemicals. In some cases, cleanup costs can even exceed a property's value. Owners and property tenants can be liable for cleanup costs they create and may even be liable if the contamination occurred before the owner or tenant came onto the property.

Why do Residential Real Estate Buyers Need Environmental Audits?

While environmental audits are becoming routine for commercial and industrial property purchases, care should be taken when buying residential property too. Consider the following example: A family buys a spacious new house, built in the 1950s, located in a good neighborhood. It’s just what they had been looking for! The house is heated by a forced air, oil furnace. In the backyard, a small, capped pipe (the fill pipe for the buried oil tank that supplies the furnace), sticks up out of the ground.

Could the family be buying an expensive problem? Possibly.

After less than a year, the family realizes that they need to reorder fuel for the furnace sooner than they had anticipated. They mention this to the oil supplier, and, upon inspection, the old tank turns out to have a leak. This means that both the tank and surrounding contaminated soil need to be removed at a considerable expense to the homeowner. The family is not pleased because they now have to spend their savings on the cleanup rather than going on their planned summer vacation to Disneyland. 

Who Pays for Residential Environmental Cleanup?

While there are a number of factors that can affect the answer, the family currently living in the home is likely to bear at least the initial burden of dealing with this unwanted problem and expense. The Oregon Department of Environmental Quality (DEQ) generally looks to the current owner for cleanup. The family understandably feels they should not be entirely responsible, since they are relatively new to the property. They contact the seller, inform him of the situation and ask for assistance. The seller refuses to help.

The seller explains that not only did he disclose that the house had an oil furnace, but the fill spout was visible in the yard. He says the buyers should have known the tank was buried, since no tank was visible above ground. Also, the seller claims he had no knowledge of any leak, and the furnace was working when he sold the property. He says the leak must have occurred after he left. 

An experienced environmental attorney could assist the family in evaluating whether it would be worthwhile to file a contribution claim against the seller. The strength of that claim will depend, in part, on what the sale documents said and what the seller and his real estate broker said or did not say prior to sale. 

In any event, unless a new owner can establish that it made diligent inquiry before buying and qualifies as an "innocent purchaser," DEQ will require the new owner to conduct the cleanup. Since the family failed to investigate the condition of the oil tank before purchasing, the family here likely would not qualify as being "innocent purchasers." DEQ also knows that current owners are much more motivated to deal with this problem rather than former owners who may have moved from the area. Since liability for cleanup is "joint and several," DEQ can choose which potentially responsible party it wishes to pursue.

How could the family have protected itself from getting into this difficult situation in the first place? Prospective purchasers need to be alert to a wide range of potential problems. Today, it is not enough simply to inquire about the age of the roof or get a termite and dry rot report when buying real estate.

Environmental Hazard Examples

Real property buyers should be alert to a number of issues, including:

• Current or past signs of heating oil use, such as a furnace in the cellar or pipes sticking out of the ground near the house.

• If an older home, whether or not it contains asbestos.

• Metal drums on the property or stained soil with chemical smells.

If a buyer learns a problem might be present, they should investigate further. To qualify as an "innocent purchaser," and to try to obtain protection from liability for cleanup costs, a buyer must exercise due diligence in investigating conditions before closing the purchase. This requires making all appropriate inquiries that could reveal possible contamination.

What About Commercial Real Estate and Environmental Hazards?

Consider another example, this time in a commercial setting. A business desires a larger, more visible location. They locate a suitable site and lease it. The business takes comfort in the fact that an old fuel tank has recently been removed, and the DEQ has issued a letter stating that no further action is required regarding the tank. Can the tenant rely on DEQ's letter to protect it fully? Unfortunately, no. The DEQ letter only covers the tank removal and cleanup. It does not address or affect any other condition that may be present on the property.

The best protection for a potential tenant is to obtain an environmental site assessment or audit, sometimes referred to as an ESA. An ESA is a report prepared by a licensed environmental consultant for a real estate holding. The report identifies potential or existing environmental contamination using a phased process. The ESA typically addresses both the underlying land as well as any physical improvements to the property. If the landlord does not provide such a report, the prospective tenant can obtain one and, in some cases, deduct the cost from the purchase price.

If the property had been leased to similar businesses in the past, and contamination is later discovered, it is often quite difficult to prove which business caused the release. This is another reason it can be important to obtain an ESA before buying or leasing.

Because the cost of investigation and cleanup can be high, it is important to make reasonable inquiry about past activities and uses that might have resulted in a release prior to buying or occupying a property. It is generally far better to know what you are dealing with in advance than to discover a larger problem after you bought or leased the property. 

Does an Environmental Analysis Guarantee the Property is Clean?

Keep in mind that while a thorough environmental analysis can protect a buyer from liability for cleanup of past contamination, it does not guarantee the property is clean. In one case, a property had a DEQ “No Further Action” letter for a recent tank removal and an environmental audit. Nevertheless, when excavation was completed for the foundation of a new building, unexpected contamination was discovered. However, because the buyer had fortunately undertaken reasonable care in trying to assess the property, they qualified as “innocent purchasers” and did not have to pay for the secondary contamination. 

It can be difficult to be certain that a property does not have some contamination. Prospective purchasers should exercise due diligence to minimize risks. Qualified professionals should be consulted about what level of inquiry is appropriate in a given circumstance in order for purchasers to protect themselves from liability as best they can.

If you have encountered an issue with environmental hazards on your property, it can be helpful to work with an experienced land use lawyer to ensure you are in-the-known regarding your options and assess your likelihood of qualifying as an “innocent purchaser.” Book a consultation with us today!

The information provided here does not constitute legal advice. Hutchinson Cox makes neither express nor implied warranties regarding the use of this material. The reader should always seek competent legal advice as the facts of every case vary.

A Guide to Limiting Your Liability for Land Use and Environmental Problems in Oregon

By Liam Sherlock

If you’re a property owner or manager in Oregon looking to limit your liability for land use and environmental problems, this guide is for you. Our tips can be particularly helpful before you purchase a property or sign a real estate contract.

3 Times When it’s Important to Examine Land Use Issues Prior to Signing a Contract

There are three major periods in time when it is prudent to examine land use and environmental issues before signing a contract. Those include when you:

• Purchase, lease, or agree to manage real property

• Plan for expensive development of your property

• Sell the property

Sometimes it isn’t immediately obvious whose interests you need to consider when making these examinations. Generally, there are three categories of people or entities who may interact with the property. The property owner or manager must protect against land use and environmental risks associated with:

1. Contracting Parties

Contracting parties are those with whom the owner will have a contract (e.g., buyers, sellers, landlords and tenants) affecting real property.

2. Third Parties

Third parties are defined as those who come on the land or who supply goods that benefit the land (e.g., customers, friends, trespassers, material and labor suppliers).

3. Governmental Agencies

Governmental agencies include city or county planning and zoning authorities, and state and federal workers’ safety organizations.

When Do I Need A Written Contract for My Real Estate Transactions?

With almost all land use and environmental issues, the two opposite parties to a transaction (e.g., buyer/seller or landlord/tenant) will have opposite goals when it comes to acceptable language to deal with these issues. So knowledge and effective negotiation and document preparation is the most important way to protect your particular position in the transaction. 

A pre-negotiation land use and environmental issue evaluation checklist should be prepared and reviewed to make certain that you both identify the land use and environmental law issues that must be faced in the transaction and the position that you will put forward for resolving them. Items to consider at this stage, include:

• What are the necessary land use permits and who will be responsible for paying for them?

• Who will obtain and pay for an environmental audit and who will be entitled to its results? What will be the effect on the transaction if chemical contamination is discovered?

• What representations and warranties will the seller be asked to make as to the condition of the property, etc.?

What Should I Consider When Selling my Property?

The general rule is to make as few as possible specific representations or warranties as to the status or condition of the land. If negotiations require that the written contract contain certain representations and warranties, make them as specific as possible. Do not represent anything that you are not substantially certain of. For example, it is much safer to state, “To the best of seller’s knowledge and belief, there are no levels of toxic or hazardous chemical residues on the property requiring cleanup, removal or other remediation under applicable law,” than it is to state, “There are no toxic or hazardous chemical residues on the property.”

Sellers and managers should always remember to use representations based on “the best of their knowledge and belief” rather than complete representations.

Always include a paragraph in the contract stating that a particular written agreement is a complete incorporation of the contract, there are no unstated promises or representations relied on in connection with the purchase and sale, and that the agreement can only be modified by a signed, written agreement. 

There are multiple consequences of failure to disclose, as opposed to misrepresentation, including latent and hidden defects known to the seller. For example, unstable subsurface geology, termite damage, or soil or groundwater contaminated by chemical residues. Compare inconsequential defects and substantial defects that should be obvious to any owner. As a general rule, if the defective condition substantially adversely affects or might substantially adversely affect the buyer’s use of the property, or the price the buyer may be willing to pay, or you know the buyer is interested in the presence or absence of such a condition, disclose the condition fairly in the written documents. Then include a statement that the buyer assumes responsibility for the condition as is, as it is better to have to reduce the purchase price then it is to have to pay damages and attorney fees later on. 

When selling your property, you should also consider the nontransferable, seemingly unending liability for environmental conditions and how to deal with them. For example, property containing underground storage tanks or residues of toxic or hazardous chemicals.

You should also consider whether the seller’s required land use statement is recorded in a deed or land sale contract. See ORS 93.040, “This statement will not allow use of the property described in this instrument in violation of applicable land use laws and regulations. Before signing or accepting this instrument, the person acquiring fee title to the property should check with the appropriate city or county planning department to verify approved uses.” This is not a bar to seller’s liability for environmental problems and even for some land use law-based matters. 

If there will be an unpaid purchase price for some period of time after the sale, the seller (as well as in the case of a lease, the manager) should try to obtain an indemnification promise from the buyer (or tenant indemnifying the seller (manager) from any claim or loss stemming from the buyer’s (tenant’s) use of the real property).

Determine if there is cleanup liability to the state. Even if you obtain a written indemnity agreement from a buyer or a tenant, you have not removed your liability to the state for cleanup or removal costs associated with hazardous conditions or residues that existed at the time you bought the property. That is, unless you can qualify as an “innocent purchaser”, even if the problem was caused by criminal activity on the property that you were unaware of. (e.g., a meth lab secretly maintained by a tenant causes contamination.)

What Should I Consider When Buying a Property?

Generally, try and get as specific a representation as possible as to the particular status or condition of the land, especially where that status or condition is critical to the price you are willing to pay to purchase or lease it. For example, a purchaser of a rock quarry would like the sale document to includes the following provisions:

“Seller represents and warrants that the real property that is the subject of this transaction:
Is zoned and planned so as to allow rock quarrying and rock processing operations as an outright permitted use.
Is not the subject of any pending enforcement, compliance, cleanup, removal, permit termination or modification, or damage action by any local, state, or federal governmental agency or any investigation that could lead to the same.
Is subject to an existing operational permit and reclamation plan issued and approved by the Oregon State Department of Geology and Mineral Industries which can and will be transferred to the buyer as a condition of closing.
Possesses all other local, state and federal permits required for quarry operation, which are valid and in effect.
Does not contain any residues of toxic or hazardous wastes or chemicals as defined by state or federal law, and that seller has not been notified of any reason why such status will not continue after the sale.”

A buyer should always make a careful pre-purchase examination of the land. Depending upon the magnitude of the investment and the past and anticipated future use of the property, an independent environmental audit should also be required, with results acceptable to the buyer, as a condition to closing. Whether or not the buyer requires an environmental audit, the buyer should require that the seller indemnify and hold the buyer harmless from any claim, loss or damage resulting from the presence at the time of the closing of any toxic or hazardous chemical contamination of the property or any undisclosed and unremoved underground storage tanks.

Include in the introductory recitals to the instrument a statement of the conditions of the real property that is assumed to be present by the buyer.

Condition the closing of the sale on the obtaining of any necessary land use or environmental permits that will be necessary to carry out the anticipated operation on the property. Examples: Rezoning or conditional use permits; water availability and quality; obtaining or maintaining farm use deferral, etc.

Make certain that adequate liability insurance will be available to protect you as a buyer for your anticipated activity on the property.

What Should I Consider If I Manage Someone Else’s Property?

In your management contract with the owner, disclaim all responsibility for consequences of criminal activities or violations of statutes, regulations or ordinances by tenants. Insert a provision in your management contract requiring the owner to indemnify you from any claim or loss resulting from any action by any governmental entity stemming from use of the property in violation of federal, state or local laws or ordinances. Make clear that the burden for maintaining compliance with governmental statutes, regulations and ordinances rests on owner and tenant, not you as manager.

Attach to any rental management agreement a copy of the rental application form you will use, and do not state or suggest that you will investigate prospective tenants beyond the information provide on the form. Also state in your rental management agreement that, unless a particular reference checked proves negative, there is not obligation on your part to check all references listed. Retain right to amend rental application form at any time during the term of the management agreement.

Either affirmatively state and limit your property inspection obligation after a lease is signed, or if you market and take pride in your “full-service” responsibility to the owner, make certain:

• Periodic inspections are made and logged by you or your employees, and

• Prompt written reports of suspicious activities are made to the owner.

Check with your insurance agent to make certain—and receive confirmation in writing—that your liability insurance coverage provides you the broadest available protection from the consequences of criminal activity by tenants and from the claims of owners who you represent in connection with tenants.

If you are a buyer, seller or manager of real property, it can be helpful to have a land use attorney assist you with final contract language before you sign any real property contract or deed. If you are seeking an attorney to help you with a similar matter, book a consultation today!

The information provided here does not constitute legal advice. Hutchinson Cox makes neither express nor implied warranties regarding the use of this material. The reader should always seek competent legal advice as the facts of every case vary.

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