Environmental Liability Exemption for Lenders and Representatives

• Exemption Basics
• Obtaining the Exemption
• Obtaining the Exemption When an Assessment is More than One Year Old
• Federal Liability Exemptions for Lenders

Exemption Basics

To alleviate liability burdens that lenders and representatives may face at contaminated properties, and to promote economic redevelopment of these properties, Wisconsin’s Land Recycling Law of 1993 (Wisconsin Act 453) created lender and representative liability exemptions. These exemptions were expanded in 1997 in Wisconsin Act 27 and again in 1999 in Wisconsin Act 9.

Lenders and representatives that meet the conditions established in s. 292.21, Wis. Stats. [exit DNR], are not responsible for a hazardous substance discharge as established in s. 292.11, Wis. Stats., commonly known as the "Spill" Law.

Lenders may qualify for state liability protection at contaminated properties when:

• Conducting normal lending,
• Acquiring property through foreclosure,
• Inspecting property
• Enforcing a security interest in personal property and fixtures, and
• Acting as a representative.

For more information, please read Environmental Liability Exemption for Lenders and Representatives (RR-508) [PDF, 228KB]. The fact sheet includes the following information:

• Examples of lending situations where the lender liability exemption may be useful,
• Definitions of “lenders" and "representatives",
• Definitions of lending activities eligible for a liability exemption from the state Spill Law,
• How to conduct environmental assessments for acquiring real property,
• Lender exemptions from federal liability for underground storage tanks and Superfund, and
• Frequently asked questions.

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Obtaining the Liability Exemption

In order to be eligible for a lender liability exemption, a lender foreclosing on property with potential environmental contamination must comply with the requirements of s. 292.21, Wis. Stats., including:

• Notifying the DNR of the contamination,
• Not intentionally exacerbating an existing environmental discharge or negligently causing a new discharge,
• Implementing an emergency response action if necessary, and
• Submitting a lender liability exemption assessment to DNR. The assessment must be completed during the year preceding acquisition of the property, or within 90 days following acquisition.

Lenders or representatives intending to qualify for a lender liability exemption must submit their environmental assessment to DNR within 180 days of acquiring the property. Filing the assessment with DNR may be done in either of the following two ways:

1. Completing and submitting the Lender Liability Environmental Assessment Tracking Form (4400-196) [PDF, 13KB]. DNR will keep the assessment on file but will not provide a written response; or
2. Completing and submitting a Technical Assistance and Environmental Liability Clarification Request (Form 4400-237) [PDF, 70KB] for a lender liability exemption clarification. By including the $500 review fee and the necessary information, you will receive a written response from DNR that clarifies your liability exemption.

The lender liability exemption is a statutory provision based on the steps described above, and does not require a written response from DNR. However, some lenders prefer a written response. In those cases, lenders and representatives may pay a $500 fee for a general liability clarification letter from DNR regarding their exemption. For more information about these letters, please see our Liability page.

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Obtaining the Liability Exemption When an Assessment is More than One Year Old

The lender liability exemption assessment is to be completed during the year preceding acquisition of the property or within 90 days following acquisition of title, possession or control of the property. However, a lender may submit an assessment completed more than one year prior to acquiring a property, if the lender also conducts a visual inspection of the property after acquisition. A lender who conducts such a visual inspection must submit the inspection report to the DNR within 90 days of acquiring the property, along with the original assessment and a $500 review fee. DNR will review both the old assessment and the more recent visual inspection report to determine whether the assessment is adequate or whether more information is needed.

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Federal Liability Exemptions for Lenders

Subtitle I of the Resource Conservation and Recovery Act exempts certain lenders from liability for petroleum underground storage tanks. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund, contains a security interest exemption which protects certain lenders.

For an overview of information about these federal lender liability exemptions, please see pages 7 and 8 of Environmental Liability Exemption for Lenders and Representatives (RR-508) [PDF, 228KB].

For EPA information about underground petroleum storage tank liability, enter publication number 510F95004 in EPA’s national on-line publications system [exit DNR].

Also see EPA's fact sheet CERCLA, Brownfields and Lender Liability [exit DNR].

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For more information on this topic, contact: