A major problem with definitions of environmental terms in commercial and real estate transaction documents is that they become overly inclusive, confusing, and unworkable. A definition of “hazardous materials” which includes virtually every substance known to man in any amount at any concentration, will be impossible to satisfy in any representation regarding the absence of hazardous materials on the property. Conversely, a representation regarding “Environmental Laws” or “Environmental Requirements” may be less than anticipated if the definition uses the “list” approach and certain key environmental laws or requirements are not included. Much clarity can be obtained in the operative provisions by using defined terms with consistent and detailed definitions. The definitions often contain the key issues in the transactions and deserve considerable attention.
Hazardous Material: This is an all-embracing term that can by definition include hazardous wastes, hazardous substance and other identified hazardous materials.
a. Those substances which are identified as hazardous substances and hazardous wastes in the relevant statutes should be listed by reference to the defining federal and state statutes. CERCLA, RCRA and TSCA adequately cover the federal listings relevant to most transactions.
b. An overly inclusive definition would be “any waste, pollutant, hazardous substance, hazardous toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste, including any such substance regulated under any safety or environmental law,” It would be virtually impossible for anyone to represent that any such substances are not present at any facility, and the required disclosure necessary to make such representation accurate would likely be useless and virtually impossible to complete.
c. If the approach is taken of referring to hazardous waste or hazardous substances under the relevant statutes, care should be taken to specifically include petroleum and petroleum products to address the exception in CERCLA coverage.
d. Specific substance that may be of concern should be listed separately for clarity, such as asbestos, polychlorinated biphenyls (PCBs) radon, or formaldehyde.
e. A creative catch-all provision could be added to cover any other substance or material the presence of which at, in or on the property would require investigation and/or remediation under any Environmental Requirement.