CAUTION TO REAL ESTATE BUYERS IN THE WESTERN UNITED STATES

Late in April 2018, the U.S. Court of Appeals for the Ninth Circuit ruled that a buyer at a
sheriff’s judgment sale of property that had been foreclosed for defaulted taxes was responsible
for the cost of remediating contamination caused by the prior owner. Tax defaults on old abandoned
industrial property are not uncommon. The court was concerned that the liability a buyer would have
for historic contamination that it did not cause if it bought directly from the prior owner would
be stripped away by the tax foreclosure sale. That would leave the government to absorb the cost of
cleaning up the property.

The ruling is immediately applicable to all real estate tax foreclosure sales in Alaska, Arizona,
California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington (plus Guam and Northern Mariana
Islands). The ruling would not likely be applicable in New York, Connecticut and Vermont because
those states are within the jurisdiction of the U.S. Court of Appeals for the Second Circuit which
has a conflicting line of cases. Whether the Ninth Circuit’s decision would be followed in other
jurisdictions is uncertain at this time.

If you would like further information, please contact Norman W. Bernstein at
[email protected].