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A Landowner’s Mountain of Cleanup Costs for Tenant’s Ordinance Violations

State and federal environmental laws are the common drivers behind multi-million dollar environmental cleanups.  A recent Indiana case, however, serves a reminder to also consider the powerful requirements of the mighty local ordinances’ impacts on environmental liabilities for property owners.  

In FLM, LLC v. Metropolitan Development Commission of Marion County, Indiana http://www.in.gov/judiciary/opinions/pdf/05161701jb.pdf, the appellate court confirmed that an ordinance violation requires a property owner to remove Black Mountain.  Black Mountain is a huge pile of foundry sand accumulated by a former tenant that is more than fifty feet high, covering two acres and “leaching multiple toxic chemicals into the ground beneath it.”  The cost of Black Mountain’s removal ranges between $2.3 million or over $3.5 million, depending on the approach.

It was undisputed that the City ordinances violated by the former tenant involved failing to get a drainage permit and address erosion control, and storing materials more than twenty feet in height.  The property owner did not actually deposit any part of Black Mountain or commit these violations.

Yet, the court reasoned that the property owner had to remove Black Mountain because it is an owner of property in Marion County and it “caused, suffered or allowed” the ordinance violations on the property as described in Revised Code Section 730-505(a)(8).  It allowed the tenant’s “failure to comply with zoning district development standards. . . .”  The owner’s liability results from “allowing the violations to occur” by its own authority to permit the tenant to accumulate the foundry sand, owner’s constructive knowledge of the ordinance requirements for having the 105,000-ton Black Mountain on the property, and its failure to remediate the violations.

The court pointed out that merely owning and leasing a property is insufficient for liability. Here, the owner leased the land for the sole purpose of sand storage and the owner’s principal worked at the same property while Black Mounting was growing.  This was enough for the property owner to be liable for the tenant’s actions where owners may not “cause, suffer or allow” certain ordinance violations.