Hidden Environmental Pitfalls of Foreclosed Residential Properties

Buyers of foreclosed residential properties in California are often legal entities such as lenders and investment groups whose main goal is to prepare the foreclosed property for resale. Upon taking possession, these entities often encounter materials left behind-some of which are hazardous waste. Because entity owners do not enjoy the same homeowner exemptions for handling household hazardous waste that individuals do for their own homes, they have to tread carefully so that they comply with the applicable rules or they could be held responsible for substantial fines.

The hidden pitfall for the entity owner is that it is the responsibility of the new owner to determine whether household chemicals and materials (such as electronics and batteries), left by former residents, are waste. If the wastes are hazardous waste then the new owner becomes the hazardous waste generator, which is legally defined as the person whose act or process first causes a hazardous waste to become subject to regulation (Cal. Code Regs., title 22, 66260.10).

Hazardous waste must be handled according to the requirements of the California Health & Safety Code. These requirements are easy to violate. For example, hazardous waste regulations do not allow the mixing of incompatible wastes (such as those which could produce heat or pressure, fire or explosion, violent reaction, flammable gasses, etc.), or placing wastes into incompatible containers. Further, disposal of hazardous waste into the trash, a municipal landfill, down the drain, or any other unauthorized point is illegal.

The illegal disposal of hazardous waste is a crime and anyone who illegally disposes of a hazardous waste may be subject to fines of up to $25,000 (per day, per incident) and/or imprisonment (Health & Safety. Code, 25189 - 25196). Finally, if hazardous waste is released into the environment due to being mishandled anywhere along the way, from generation to disposal, all who handled them are liable for the costs of cleanup, as well as penalties.

There are legal options for managing materials and hazardous wastes. The primary options for entities are:

Many of the common household chemicals left by prior property owners may still be usable for their intended purpose. Any material that is used by others for its intended purpose does not constitute a waste. This option will generally be much more cost effective than managing the materials as wastes. However, materials may not be accumulated or stored in lieu of disposal. (Health and Safety Code 25143.2(b)(2)). This rule makes option 1 difficult to execute.

In some cases, businesses may qualify to be a Conditionally Exempt Small Quantity Generator (CESQG) if they generate no more than 100 kilograms of hazardous waste, or 1 kilogram of extremely hazardous waste, in a calendar month, at each site (Health and Safety Code 25218.1, 40 C.F.R. 261.5). Although an EPA ID number is still required, CESQGs may self-transport hazardous waste to a nearby household hazardous waste collection facility without being a registered hazardous waste transporter, or using a hazardous waste manifest, as long the household hazardous waste facility allows it. The total amount that can be transported cannot exceed 100 kilograms (approximately 27 gallons liquid or a total dry weight of 220 pounds), or 1 kilogram of extremely hazardous waste, per month. Importantly, prior to each transport the entity must first contact the local household hazardous waste collection facility for any restrictions it may have in place, to verify acceptance of the waste, and identify weight limitations.

Normally, hazardous wastes must be transported by a registered hazardous waste transporter using a uniform hazardous waste manifest, under an EPA ID number, and taken to an authorized treatment, storage, and disposal facility. Generators must have an EPA ID Number specific to the address at which the hazardous waste is generated. For entities this is frequently the best option, the problem is most entities do not recognize the need to do this for household hazardous waste. It can also be administratively burdensome if the entity is active in acquiring and selling multiple properties.

Finally, it bears mentioning that electronic waste is regulated as "Universal Waste". These include electronic devices, fluorescent lamps and light bulbs, aerosol cans, and alkaline batteries, which are hazardous wastes with reduced management standards, and may be handled without an EPA ID Number. If an entity is a Conditionally Exempt Small Quantity Universal Waste Generator (CESQUWG) for the property, the Universal Wastes may be transported to any other Universal Waste handler including a household hazardous waste collection facility (if they will accept it), or to an authorized treatment, storage, or disposal facility. Again, it is important for the foreclosing entity to recognize the issue so they comply with the law.