National Organization Begins Drafting Model Environmental Covenant

This past summer, the National Conference of Commissioners on Uniform State Laws (NCCUSL) began drafting a model Environmental Covenants Act for use in all 50 states. The purpose of the uniform model law would be to facilitate the implementation and enforcement of institutional controls, also known as "activity and use limitations" or "land use controls," at sites where residual contamination exists. The model law is being developed at the request of the Department of Defense and the Environmental Protection Agency.

Grappling with ways to improve the implementation, enforcement and long-term stewardship of institutional controls for the past couple of years, the EPA held two internal work shops in 2001, and is planning to issue additional Fact Sheets to launch a pilot program involving the Guardian Trust, and to host a national meeting on this topic in 2002.

Summary of the Initial Draft

Section 3 – Definitions. Many of the definitions were taken from the recently enacted Colorado law regarding institutional controls. The definition of "holder" of a covenant was taken from the Uniform Conservation Easement Act and includes governmental bodies or a charitable corporation, charitable association or charitable trust. There was a lot of discussion about (but no resolution yet) who should be the "holder" of an environmental covenant.

Section 4 – Process for Creating an Environmental Covenant. The initial draft provides that an environmental agency must be involved in the creation of an environmental covenant. A written instrument must be used that is executed with the same formalities as a deed. The draft describes a process for notifying all parties holding an interest of record in the real estate when the parties want to create, modify or terminate the environmental covenant.

Section 5 – Validity. The draft statute provides that an environmental covenant shall be valid even if there is a "deficiency" under certain common law doctrines, such as the holder does not have an appurtenant property interest, there is no privity of estate, the covenant does not "touch and concern" the land, etc.

Section 6 –Applicability. The model law is intended to apply to covenants created after the date of enactment. The model law is not intended to invalidate any other type of covenant that is otherwise valid and enforceable under the law of that state.

Section 7 – Contents. This section of the draft law as written is fairly prescriptive and is likely to be changed. This section provides that the covenant must contain (a) a legally sufficient description of the real estate, (b) a statement that the grantor intends to create a covenant under the model law, (c) a description of the requirements for modification or termination, (d) a description of the use restrictions, (e) a requirement that the department be notified at least 15 days prior to the transfer of any ownership interests, (f) a requirement that the department be notified at the time of a request for a building permit or change in land use, (g) access rights for the department, (h) notification in 15-point, bold-faced type on the front of the legal instrument that the property is subject to an environmental covenant, and (i) an agreement by the owner to include the covenant in any leases, licenses or other instruments.

Section 8 – Recording. The draft statute provides that the instruments creating environmental covenants must be created with the same formalities as a deed and must be recorded in the land records. The draft also provides that the state shall create and maintain a registry of all environmental covenants.

Section 9 – Duration. The environmental covenant is intended to last in perpetuity unless limited by its terms to a specific duration, or unless modified or terminated in accordance with the model law, or terminated by a court of competent jurisdiction. The covenant cannot be extinguished by issuance of a tax deed, foreclosure of a tax lien, through adverse possession, by eminent domain or foreclosure of a mortgage.

Section 10 – Modification or Termination. The draft provides that the owner, the department, the holder of the covenant and any party authorized to enforce the covenant may request modification or termination of the covenant. No request to modify or terminate the covenant shall be effective unless approved by the department.

Section 11 – Enforcement. The draft provides that the department may issue administrative orders to enforce the environmental covenant, and that the attorney general may initiate a civil action to enforce the covenant or to recover civil penalties. The draft currently provides that "any other person may intervene as a matter of right" in any administrative or civil proceeding brought by the department. The draft further provides that the parties listed below also may initiate a civil action:

• the grantor and the holder of the covenant
• any third-party beneficiary specifically named in the covenant
• any affected local government

The draft currently provides that the owner of the land and any lessee shall be strictly liable for any violations of the covenants and shall be jointly and strictly liable for abating any violations and can be assessed a fine. The owner of the property also must submit a written report to the department each year. The department is required to inspect the covenant at least once every five years.

Section 12 – Coordination with Local Government. The department is required to provide affected local governments with a copy of every environmental covenant within their jurisdiction. The affected local government is required to notify the department whenever they receive an application affecting land use or development of land that is burdened with an environmental covenant.

Section 13 – Marketable Title. The drafting committee believes that environmental covenants should be exempt from the Marketable Title Act.

Conclusion

The Committee will meet again in Washington, D.C., in mid-April of 2002. It hopes to have a fairly complete draft of the proposed uniform law finalized by summer. Its goal will be to submit a final version of the proposed legislation to the Uniform Laws Conference for approval at the NCCUSL’s Fall 2002 meeting. The final legislation would then be ready for submission to state legislatures by 2003.