HISTORICAL TITLE ISSUES

Integral to any property transaction, and more significantly with environmentally distressed properties, is the consideration and management of liabilities that “Run with the Land”. These are obligations that are imposed on all current and successor holders in title to the property.

These “Obligations” are generally recognized by the title companies and subsequently “Excepted” from coverage. In layman’s terms excluded. As a result the obligation and any consequence are uninsured in the title policy. In environmentally distressed properties, and example of one such obligation may be to provide a governmental environmental agency with an irrevocable right of access to the property, or to maintain the integrity of an institutional control, e.g., a clean soil cap that eliminates pathway exposure to underlying contaminated soils.

The failure to recognize these gaps in coverage can carry over to most forms of “Pollution Liability” insurance purchased for the site. Pollution policies do not grant automatic coverage to uninsured title obligations and these uninsured exposures must be recognized by the Pollution carrier in order for coverage to apply.

A thorough risk management review of the title report can aid in the identification of these “Continuing Obligations” and can be used in the Contract of Sale negotiations and for analysis of proper risk management controls for the identified exposures.

The following are some examples of some conditions that “Run with the Land” such as:

• Agreements that may impose and/or transfer liability (ACO, maintenance, indemnification)
• Releases and Waivers that may impose obligations
• Easements (utility, conservation, access)
• Restrictions
• Covenants to maintain institutional controls
• Tidelands or Riparian Rights

The staff at Stanford Risk Management Services, Inc. will work with your transactional and environmental counsel as well as with your environmental consultants in securing the title information for the consultant’s compliance with statutory due diligence. Obtaining the appropriate title information will also expedite the broader risk management analysis of the information to aid in the identification of legacy liabilities that can impact the purchase and ownership of the property. Through our associate, Passaic Valley Title Service, Inc. (www.pvts.com) we can also provide the necessary Title Insurance required to finalize the transaction.

CONTINUING TITLE OBLIGATIONS

As indicated above, there are instances where the obligations that “Run with the Land” impose active obligations that require the titleholder to maintain certain engineering and/or administrative controls. In the environmental realm these are represented in the form of Deed restrictions related to the environmental conditions at the site subsequent to site remediation and issuance of the regulatory sign off. Essentially, remediation to less than pristine condition is permitted based on the titleholder’s obligation to maintain certain engineering and/or administrative controls at the site. Generally, this obligation “Runs with the Land” and violation of the obligation can terminate the regulatory sign off on the remediation (NFA) and also terminate the “Innocent Purchaser Defense” that was achieved by your proper statutory due diligence.

In order to address this obligation and maintain the enforcement of the regulatory sign off and defense benefits we have now associated with the American Brownfields Assurance Company www.americanbrownfields.com . This nonprofit now offers a continuing obligation service which will conduct all the necessary actions required under the deed restriction(s), including and not limited to site evaluation and monitoring, thus aiding in compliance with the obligations that “Run with the Land” and maintain the regulator sign off(NFA) and innocent Purchaser Defense for the monitored site.