When negotiating a commercial lease for a retail store, environmental issues are typically not as high on the priority issues list as they would be if the property was industrial. However, the EPA’s waste generation rules apply to retail stores too.
In a typical retail lease, as in any lease, at a minimum it will include a broad requirement that the tenant must comply with all laws applicable to it and it will also often include a simple covenant to not violate environmental rules and regulations. It may not run on for a page or two but the point will be the same….tenants must comply with environmental regulations applicable to their operations at the leased premises.
The EPA’s rules and regulations with respect to hazardous waste generation are one example of rules drafted a long time ago with industry in mind now apply to retail stores. While it is easy to see how that could be true when talking about an automotive supply store with the typical products that would be sold in such a location, the reach is much broader.
Stores have to deal with slow moving merchandise that takes up valuable shelf space. Items that are obsolete or damaged or otherwise not salable need to be removed to make room for new merchandise. However, the disposal of some of these items can trigger the EPA’s regulations on hazardous waste generation. Think of batteries of all shapes and sizes, aerosol cans and nicotine patches and other medications (including some over the counter products), just to name a few. Many small retail tenants are probably not even aware that such rules and regulations apply to them, and therefore may be in breach of environmental covenants in their leases without knowing it.
The EPA has finally started to focus on the need to revamp the regulations for application to the retail sector and earlier in the fall issued its Strategy for Addressing the Retail Sector under the Resource Conservation & Recovery Act (RCRA) Regulatory Framework.
Landlords of commercial retail property should take care to ensure that their leases require tenants to comply with all environmental rules and regulations, and indemnify for violation. Retail tenants need to be aware that their operations, particularly when it comes to disposal of merchandise, can be subject to RCRA and similar laws on a state level.