In a May 2, 1996 decision, the Appellate Division of the Superior Court of New Jersey emphasized the need to carefully draft agreements of purchase and sale for real property where an environmental cleanup is involved. In Duro-Test Corp. v. Nodar, the court held that, because the parties' agreement did not address the issue specifically, the agreement must be examined as a whole in determining whether the filing of a Declaration of Environmental Restrictions ("DER") was intended by the parties to effectuate the cleanup of the property. (Coincidentally, "DER" is the same acronym used to refer to a "discrete emissions reduction").
A DER enables a party to remediate property to a nonresidential soil remediation standard or to use engineering or institutional controls in lieu of remediation to an established cleanup standard. In either case, NJDEP requires the recording of a DER, with the consent of the property owner, in order to inform prospective holders of an interest in the property that contamination exists on the property at a level that may statutorily restrict certain uses of or access to all or part of the property. The DER must also delineate all of those restrictions, describe of all specific engineering or institutional controls emplaced at the property, and be executed by the property owner. Because the consent of the property owner is required for the filing of a DER, an agreement for the purchase and sale of property should explicitly provide that the property owner will consent to the filing of a DER to effect the remediation of the property.
Because the contract at issue in Duro-Test Corp. was drafted prior to the enactment of ISRA in 1993, when the concept of a DER was formally introduced, the agreement did not specifically address the parties' intent as to the filing of a DER as part of the remedial process. In addition, various references within the agreement arguably indicated that the parties did not intend to limit in any way the future uses of the property. Thus, the court remanded the case to the trial court to determine the parties' intent at the time that they executed the agreement.
The lesson to be gleaned from Duro-Test Corp. is a significant one: where remediation may be involved, the parties to an agreement of purchase and sale must make their intentions explicit as regards a DER and, arguably, other remedial alternatives, or risk having a reviewing court interpret the agreement in an unintended manner.
