78B-6-909 - Environmental impairment to real property security interest -- Remedies of lender.
78B-6-909. Environmental impairment to real property security interest --Remedies of lender.
(1) As used in this section:
(a) "Borrower" means:
(i) the trustor under a deed of trust, or a mortgagor under a mortgage, when the deed oftrust or mortgage encumbers real property security and secures the performance of the trustor ormortgagor under a loan, extension of credit, guaranty, or other obligation; and
(ii) includes any successor-in-interest of the trustor or mortgagor to the real propertysecurity before the deed of trust or mortgage has been discharged, reconveyed, or foreclosedupon.
(b) "Environmentally impaired" means the estimated costs to clean up and remediate apast or present release of any hazardous matter into, onto, beneath, or from the real propertysecurity exceed 25% of the higher of the aggregate fair market value of all security for the loan orextension of credit at the time:
(i) of the making of the loan or extension of credit;
(ii) of the discovery of the release or threatened release by the secured lender; or
(iii) an action is brought under this section.
(c) "Hazardous matter" means:
(i) any hazardous substance or hazardous material as defined in Section 19-6-302; or
(ii) any waste or pollutant as defined in Section 19-5-102.
(d) "Real property security" means any real property and improvements other than realproperty that contains only one but not more than four dwelling units, and is solely used foreither:
(i) residential purposes; or
(ii) if reasonably contemplated by the parties to the deed of trust or mortgage, residentialpurposes as well as limited agricultural or commercial purposes incidental to the residentialpurposes.
(e) "Release" has the same meaning as in Section 19-6-302.
(f) "Secured lender" means:
(i) the trustee, the beneficiary, or both under a deed of trust against the real propertysecurity;
(ii) the mortgagee under a mortgage against the real property security; and
(iii) any successor-in-interest of the trustee, beneficiary, or mortgagee under the deed oftrust or mortgage.
(2) Under this section:
(a) Estimated costs to clean up and remediate the contamination caused by the releaseinclude only those costs that would be incurred reasonably and in good faith.
(b) Fair market value is determined without giving consideration to the release, and isexclusive of the amount of all liens and encumbrances against the security that are senior inpriority to the lien of the secured lender.
(c) Any real property security for any loan or extension of credit secured by a singleparcel of real property is considered environmentally impaired if the property is:
(i) included in or proposed for the National Priorities List under Section 42 U.S.C. 9605;
(ii) any list identifying leaking underground storage tanks under 42 U.S.C. 6991 et seq.;or
(iii) in any list published by the Department of Environmental Quality under Section19-6-311.
(3) A secured lender may elect between the following when the real property security isenvironmentally impaired and the borrower's obligations to the secured lender are in default:
(a) (i) waiver of its lien against:
(A) any parcel of real property security or any portion of that parcel that isenvironmentally impaired; and
(B) all or any portion of the fixtures and personal property attached to the parcels; and
(ii) exercise of:
(A) the rights and remedies of an unsecured creditor, including reduction of its claimagainst the borrower to judgment; and
(B) any other rights and remedies permitted by law; or
(b) exercise of:
(i) the rights and remedies of a creditor secured by a deed of trust or mortgage and, ifapplicable, a lien against fixtures or personal property attached to the real property security; and
(ii) any other rights and remedies permitted by law, including the right to obtain adeficiency judgment.
(c) The provisions of this subsection take precedence over Section 78B-6-901.
(4) (a) Subsection (3) is applicable only if in conjunction with and at the time of themaking, renewal, or modification of the loan, extension of credit, guaranty, or other obligationsecured by the real property security, the secured lender:
(i) did not know or have reason to know of a release of any hazardous matter into, onto,beneath, or from the real property security; and
(ii) undertook all appropriate inquiry into the previous ownership and uses of the realproperty security consistent with good commercial or customary practice in an effort to minimizeliability.
(b) For the purposes of Subsection (4)(a)(ii), the court shall take into account:
(i) any specialized knowledge or experience of the secured lender;
(ii) the relationship of the purchase price to the value of the real property security ifuncontaminated;
(iii) commonly known or reasonably ascertainable information about the real propertysecurity;
(iv) the obviousness of the presence or likely presence of contamination at the realproperty security; and
(v) the ability to detect the contamination by appropriate inspection.
(5) (a) Before the secured lender may waive its lien against any real property securityunder Subsection (3)(a) on the basis of environmental impairment the secured lender shall:
(i) provide written notice of the default to the borrower; and
(ii) bring a valuation and confirmation action against the borrower in a court ofcompetent jurisdiction and obtain an order establishing the value of the subject real propertysecurity.
(b) The complaint in an action under Subsection (5)(a)(ii) may include causes of actionfor a money judgment for all or part of the secured obligation, in which case the waiver of thesecured lender's liens under Subsection (3)(a) may result only if a final money judgment isobtained against the borrower.
(6) (a) If a secured lender elects the rights and remedies under Subsection (3)(a) and theborrower's obligations are also secured by other real property security, fixtures, or personalproperty, the secured lender shall first foreclose against the additional collateral to the extentrequired by applicable law.
(b) Under this subsection the amount of the judgment of the secured lender underSubsection (3)(a) is limited to the remaining balance of the borrower's obligations after theapplication of the proceeds of the additional collateral.
(c) The borrower may waive or modify the foreclosure requirements of this Subsection(6) if the waiver or modification is in writing and signed by the borrower after default.
(7) This section does not affect any rights or obligations arising under contracts existingbefore July 1, 1993, and applies only to loans, extensions of credit, guaranties, or otherobligations secured by real property security made, renewed, or modified on or after July 1, 1993.
Renumbered and Amended by Chapter 3, 2008 General Session