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Appellate Division Clears Way for Business Entities to Receive Brownfield Innocent Party Grants When Property Is Transferred among Family Members

Energy and Environmental Trends Watch

The New Jersey Appellate Division recently lessened the rigidity by which an innocent purchaser may be eligible for a so-called “Innocent Party Grant” to cover costs associated with the remediation of contaminated property. On September 20, 2017, the Court in Cedar Knolls 2006, LLC v. New Jersey Dep’t of Envtl. Prot. reversed the New Jersey Department of Environmental Protection’s (“NJDEP”) attempt to limit Innocent Party Grants to natural persons, and found that an LLC may qualify as a “person” under the Brownfield and Contaminated Site Remediation Act, N.J.S.A. 58:10B-1, et seq. (“Brownfield Act”).

The dispute arose in 2015, when Cedar Knolls 2006, LLC (“Cedar Knolls”) applied to NJDEP for a Hazardous Discharge Site Remediation Fund Innocent Party Grant to remediate certain property in Hanover Township. Under the Brownfield Act, a “person” who owns contaminated property may qualify for such a Grant to pay for the remediation of contaminated property if, among other things, that person acquired the property prior to December 31, 1983, and continued to own the property until such time that the authority approves the Grant. NJDEP, however, issued a tentative decision denying the application, finding that the Cedar Knolls entity was not a “person” under the Act due to the manner in which it acquired the property. The property at issue was first purchased in 1977 by an individual who, upon his death, bequeathed it to his wife in two separate trusts. The wife then assigned her interest in the property to two other trusts, and when those trusts expired, the interest in the property was transferred to the wife’s son, who then transferred his interest to the newly created LLC, Cedar Knolls.

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