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A prior owner of environmentally contaminated real property may soon face liability under New Jersey law for historical contamination which it did not contribute to or cause. New Jersey courts previously seemed to agree that the New Jersey Spill Compensation and Control Act (Spill Act) exempted a prior owner of contaminated property from liability for hazardous substances that were discharged on its property before its ownership, unless the prior owner caused or contributed to the contamination. See, e.g., White Oak Funding v. Winning, 341 N.J. Super. 294, 300-01 (App. Div.), certif. denied 170 N.J. 209 (2001). A prior owner that did not cause or contribute to contamination is often referred to as an “interim owner” because it purchased the property after the discharge of contamination took place thereon and has since sold the property to a new owner.

Several years ago, two New Jersey courts held that a current owner of contaminated property is liable for contamination that predates its ownership, even if it did not cause or contribute to it. The courts based this liability on the failure of the current owner to qualify as an “innocent purchaser” who is statutorily exempt from liability under the Spill Act if it conducted appropriate due diligence prior to acquisition of the property and, as a result, had no reason to know of contamination thereon. In embracing such liability, these courts may have opened the door to imposing similar liability for preexisting contamination on an interim owner if the interim owner similarly fails to qualify as an innocent purchaser. If the courts were to impose liability on an interim owner where it fails to qualify as an “innocent purchaser,” it would represent a significant expansion in New Jersey law under the Spill Act and would expose many additional parties to liability.

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