Lender Liability for Environmental Harm
This paper will examine how the issues of lender liability for environmental harms are handled in the United States. Canada, and Australia. The main focus of the paper will be on the whether a lender can be held liable for environmental harms as an owner or person in control of a contaminated site. The principle way in which a lender can be held liable is by forcing it to pay for the cost of cleaning up a contaminated site. The main controversy in this area is whether the security interest held by a lender is a sufficient enough property interest to classify the lender as an owner or gives the lender enough control of the contaminated site. The section of this paper concerning the United States will focus solely upon federal law, namely CERCLA, since federal environmental law constitutes a fairly comprehensive system which governs most parties throughout the United States. The sections concerning Canadian and Australian law will focus solely upon the laws of particular provinces and states, because there is no overall federal environmental law in either of these countries.
Although almost of the states in the United States have enacted environmental legislation which can potentially affect lenders, the most important legislation in this area has been enacted by the federal government. The states have the power to enact such legislation because it falls within the purview of traditional health and safety concerns, which were left to the states. On the other hand, the federal government has also acted in this area in order to create a uniform system of laws which will apply to all entities in all states. This ostensibly provides some degree of certainty to businesses, allowing them to plan with one set of standards in mind.
The federal government was early to adopt legislation which held lenders to varying degrees of liability for environmental harm caused by borrowers. In 1980...