Illinois has quietly adopted the Uniform Environmental Covenants Act (PA 95-845), which will become effective January 1, 2009. This law prescribes a procedure for creating and recording “environmental covenants” that will bind various parties to carry out remediation or otherwise maintain environmental controls (e.g. engineered barriers) in perpetuity, or such shorter time as the covenant states. The law expressly will not affect recorded restrictions of a similar nature that precede 2009, whether they are called covenants, easements, servitudes or other terms. The law is designed to provide more certainty and enforceability for the parties and the public than is presently provided by voluntary controls. Such certainty is particularly important at higher risk sites where the state or federal governments are involved in approving remediation plans.

Upon its effective date, an owner of realty may voluntarily enter into an “environmental covenant” with an agency and, if desired, one or more “holders." Also, where there is an “environmental response project” underway or required under laws such as CERCLA (Superfund), RCRA, or pursuant to court of pollution board order under the Illinois Environmental Protection Act, failure of an owner to accept and enter into an environmental covenant can be grounds for agency disapproval of a particular environmental response project. Persons that are “holders” are deemed to have interests in the real estate. Holders can be interested public parties, beneficiaries, or almost any other person, even the seller.

The law preserves the enforceability of institutional controls provided in the rules governing EPA issuance of No Further Remediation letters. The law is not clear on whether the Illinois EPA can or would seek to exact an “environmental covenant” as part of the issuance of No Further Remediation letters. Illinois EPA is directed to maintain a Registry of all issued “environmental covenants.”

These environmental covenants will run with the land and they are enforceable in court by parties to them, irrespective of concepts like lack of consideration, privity of contract, negativity of burden, assignment, or death of the obligated person. Changes in them or termination are generally subject to public notice. They are not intended to take priority over prior-recorded instruments such as mortgages, unless they say so and proper authorization from subordinated parties is given.

Our sense of this law is that it presents both a possible burden and an opportunity. For private parties, voluntary entry into covenants under this new law could give added assurance of future effectiveness of environmental requirements. For example, in selling troubled realty, this law can give a seller added protection that the buyer or some third party will perform after title passes. Where municipalities are endeavoring to get troubled properties back into use, creative covenants can provide mechanisms to assure lenders and others involved of how the future will be taken care of. However, parties faced with complex cleanups or potential agency enforcement may find the covenants and their negotiation to be an added cost and concern. Parties faced with agency enforcement likely will be told they will have to enter into strict covenants in order to dispose of cases.

Parties dealing with Illinois real estate that has contamination need to be aware of the new law and of its potential for use by or against them in both constructive and unfavorable ways. Hinshaw’s Environmental Specialty Group works closely with the firm's transactional and real estate attorneys to address these kinds of questions.

For further information, please contact Harvey M. Sheldon or your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.