(415 ILCS 5/57.12A)

Sec. 57.12A. Lender liability; definitions.

(a) Notwithstanding any other provision or rule of law, the term "owner" or "operator" does not include a holder who, without participating in the management of a facility, underground storage tank, or underground storage tank system, holds any indicia of ownership primarily to protect its security interest in the facility, underground storage tank, or underground storage tank system.

(b) As used in this Section, and notwithstanding any other provision or rule of law:

(1) "Underground Storage Tank technical standards" refers to the underground storage tank preventative and operating requirements under the rules promulgated under subsection (a) of Section 57.1 of this Title.

(2) Petroleum production, refining, and marketing.

(A) "Petroleum production" means the production of crude oil or other forms of petroleum as well as the production of petroleum products from purchased materials.

(B) "Petroleum refining" means the cracking, distillation, separation, conversion, upgrading, and finishing of refined petroleum or petroleum products.

(C) "Petroleum marketing" means the distribution, transfer, or sale of petroleum or petroleum products for wholesale or retail purposes.

(3) "Indicia of ownership" means evidence of a secured interest, evidence of an interest in a security interest, or evidence of an interest in real or personal property securing a loan or other obligation, including any legal or equitable title to real or personal property acquired incident to foreclosure or its equivalents. Evidence of such interests includes, but is not limited to, mortgages, deeds of trust, liens, surety bonds, and guarantees of obligations, title held pursuant to a lease financing transaction in which the lessor does not select initially the leased property (lease financing transaction), legal or equitable title obtained pursuant to foreclosure, and their equivalents. Evidence of such interests also includes assignments, pledges, or other rights to or other forms of encumbrance against property that are held primarily to protect a security interest. A person is not required to hold title or a security interest in order to maintain indicia of ownership.

(4) A "holder" is a person who maintains indicia of ownership (as defined in item (3) of subsection (b)) primarily to protect a security interest (as defined in item (6)(A) of subsection (b)) in a petroleum underground storage tank or underground storage tank system. "Holder" includes the initial holder; any subsequent holder; a guarantor of an obligation; a surety; any other person who holds ownership indicia primarily to protect a security interest; or a receiver or other person who acts on behalf or for the benefit of a holder.

(5) A "borrower", "debtor", or "obligor" is a person whose underground storage tank or underground storage tank system is encumbered by a security interest. These terms may be used interchangeably.

(6) "Primarily to protect a security interest" means that the holder's indicia of ownership are held primarily for the purpose of securing payment or performance of an obligation.

(A) "Security interest" means an interest in a petroleum underground storage tank or underground storage tank system or in the facility or property on which the underground storage tank or underground storage tank system is located, created, or established for the purpose of securing a loan or other obligation. Security interests include but are not limited to mortgages, deeds of trusts, liens, and title pursuant to lease financing transactions. Security interests may also arise from transactions such as sale and leasebacks, conditional sales, installment sales, trust receipt transactions, certain assignments, factoring agreements, accounts receivable financing arrangements, and consignments, if the transaction creates or establishes an interest in an underground storage tank or underground storage tank system or in the facility or property on which the underground storage tank or underground storage tank system is located, for the purpose of securing a loan or other obligation.

(B) "Primarily to protect a security interest", as used in this Section, does not include indicia of ownership held primarily for investment purposes, nor ownership indicia held primarily for purposes other than as protection for a security interest. A holder may have other, secondary reasons for maintaining indicia of ownership, but the primary reason why ownership indicia are held must be as protection for a security interest.

(c) Participation in management.

The term "participating in the management of an underground storage tank or underground storage tank system" means that the holder is engaging in acts of petroleum underground storage tank or underground storage tank system management, as defined herein.

(1) Actions that are participation in management pre-foreclosure.

Participation in the management of an underground storage tank or underground storage tank system means, for purposes of this Section, actual participation in the management or control of decision making related to the underground storage tank or underground storage tank system by the holder and does not include the mere capacity or ability to influence or the unexercised right to control underground storage tank or underground storage tank system operations. A holder is participating in management, while the borrower is still in possession of the underground storage tank or underground storage tank system encumbered by the security interest, only if the holder either:

(A) exercises decision making control over the borrower's environmental compliance, such that the holder has undertaken responsibility for the borrower's underground storage tank or underground storage tank system management; or

(B) exercises control at a level comparable to that of a manager of the borrower's enterprise, such that the holder has assumed or manifested responsibility for the overall management of the enterprise encompassing the day-to-day decision making of the enterprise with respect to (i) environmental compliance, or (ii) all, or substantially all, of the operational (as opposed to financial or administrative) aspects of the enterprise other than environmental compliance.

(2) Actions that are not participation in management pre-foreclosure.

(A) Actions at the inception of the loan or other transaction. No act or omission prior to the time that indicia of ownership are held primarily to protect a security interest constitutes evidence of participation in management within the meaning of this Section. A prospective holder who undertakes or requires an environmental investigation of the underground storage tank or underground storage tank system in which indicia of ownership are to be held or requires a prospective borrower to clean up contamination from the underground storage tank or underground storage tank system or to comply or come into compliance with any applicable law or regulation is not by that action considered to be participating in the management of the underground storage tank or underground storage tank system.

(B) Loan policing and workout. Actions that are consistent with holding ownership indicia primarily to protect a security interest do not constitute participation in management for purposes of this Section. The authority for the holder to take such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental, and other warranties, covenants, conditions, representations, or promises from the borrower. Loan policing and workout activities cover and include all such activities up to foreclosure or its equivalents, exclusive of any activities that constitute participation in management.

(i) Policing the security interest or loan. A holder who engages in policing activities prior to foreclosure shall remain within the exemption provided that the holder does not by such actions participate in the management of the underground storage tank or underground storage tank system as provided in item (1) of subsection (c). Such actions include, but are not limited to, requiring the borrower to clean up contamination from the underground storage tank or underground storage tank system during the term of the security interest; requiring the borrower to comply or come into compliance with applicable federal, State, and local environmental and other laws, rules, and regulations during the term of the security interest; securing or exercising authority to monitor or inspect the underground storage tank or underground storage tank system in which indicia of ownership are maintained or the borrower's business or financial condition during the term of the security interest; or taking other actions to adequately police the loan or security interest (such as requiring a borrower to comply with any warranties, covenants, conditions, representation, or promises from the borrower).

(ii) Loan workout. A holder who engages in workout activities prior to foreclosure or its equivalents will remain within the exemption of this Section provided that the holder does not by such action participate in the management of the underground storage tank or underground storage tank system as provided in item (1) of subsection (c). For purposes of this Section, "workout" refers to those actions by which a holder, at any time prior to foreclosure or its equivalents, seeks to prevent, cure, or mitigate a default by the borrower or obligor; or to preserve, or prevent the diminution of, the value of the security. Workout activities include, but are not limited to, restructuring or renegotiating the terms of the security interest; requiring payment of additional rent or interest; exercising forbearance; requiring or exercising rights under an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights under an escrow agreement pertaining to amounts owing to an obligor; providing specific or general financial or other advice, suggestions, counseling, or guidance; and exercising any right or remedy the holder is entitled to by law or under any warranties, covenants, conditions, representations, or promises from the borrower.

(3) Foreclosure on an underground storage tank or underground storage tank system and participation in management activities; post-foreclosure.

(A) Foreclosure. Indicia of ownership that are held primarily to protect a security interest include legal or equitable title acquired through or incident to foreclosure or its equivalents. For purposes of this Section, the term foreclosure or its equivalents includes purchase at foreclosure sale; acquisition or assignment of title in lieu of foreclosure; termination of a lease or other repossession; acquisition of a right to title or possession; an agreement in satisfaction of the obligation; or any other formal or informal manner by which the holder acquires title to or possession of the secured underground storage tank or underground storage tank system. The indicia of ownership held after foreclosure continues to be maintained primarily as protection for a security interest provided that the holder undertakes to sell, re-lease an underground storage tank or underground storage tank system held pursuant to a lease financing transaction, or otherwise divest itself or the underground storage tank or underground storage tank system in a reasonably expeditious manner, using whatever commercially reasonable means are relevant or appropriate with respect to the underground storage tank or underground storage tank system, taking all facts and circumstances into consideration, and provided that the holder did not participate in management, as defined in item (1) of subsection (c), prior to foreclosure or its equivalents. For purposes of establishing that a holder is seeking to sell, re-lease an underground storage tank or underground storage tank system held pursuant to a lease financing transaction, or divest an underground storage tank or underground storage tank system in a reasonably expeditious manner, the holder may use whatever commercially reasonable means as are relevant or appropriate with respect to the underground storage tank or underground storage tank system, or may employ the means specified in item (3)(B) of subsection (c). A holder that outbids, rejects, or fails to act upon a written bona fide, firm offer of fair consideration for the underground storage tank or underground storage tank system, as provided in item (3)(B) of subsection (b), is not considered to hold indicia of ownership primarily to protect a security interest.

(B) Holding foreclosed property for disposition and liquidation. A holder who did not participate in management prior to foreclosure or its equivalents may sell, re-lease an underground storage tank or underground storage tank system held pursuant to a lease financing transaction, liquidate, wind up operations, and take measures to preserve, protect, or prepare the secured underground storage tank or underground storage tank system prior to sale or other disposition. The holder may conduct these activities without voiding the exemption, subject to the requirements of this Section.

(i) A holder establishes that the ownership indicia maintained following foreclosure or its equivalents continue to be held primarily to protect a security interest by listing, within 12 months from the time that the holder acquires marketable title, the underground storage tank or underground storage tank system or the facility or property on which the underground storage tank or underground storage tank system is located, with a broker, dealer, or agent who deals with the type of property in question or by advertising the underground storage tank or underground storage tank system as being for sale or disposition on at least a monthly basis in either a real estate publication or a trade or other publication suitable for the underground storage tank or underground storage tank system in question, or a newspaper of general circulation (defined as one with a circulation over 10,000, or one suitable under any applicable federal, State, or local rules of court for publication required by court order or rules of civil procedure) covering the area in which the underground storage tank or underground storage tank system is located.

If the holder fails to act diligently to acquire marketable title, the 12 month period begins to run on the date of the judgment of foreclosure or its equivalents.

(ii) A holder that outbids, rejects, or fails to act upon an offer of fair consideration for the underground storage tank or underground storage tank system or the facility or property on which the underground storage tank or underground storage tank system is located establishes by such outbidding, rejection, or failure to act, that the ownership indicia in the secured underground storage tank or underground storage tank system are not held primarily to protect the security interest, unless the holder is required, in order to avoid liability under federal or State law, to make a higher bid, to obtain a higher offer, or to seek or obtain an offer in a different manner.

(A) "Fair consideration", in the case of a holder maintaining indicia of ownership primarily to protect a senior security interest in the underground storage tank or underground storage tank system, is the value of the security interest as defined in this item (3)(B)(iii)(A) of subsection (c). The value of the security interest is calculated as an amount equal to or in excess of the sum of the outstanding principal, or comparable amount in the case of a lease that constitutes a security interest, owed to the holder immediately preceding the acquisition of full title (or possession in the case of an underground storage tank or underground storage tank system subject to a lease financing transaction) pursuant to foreclosure or its equivalents, plus any unpaid interest, rent, or penalties (whether arising before or after foreclosure or its equivalents), plus all reasonable and necessary costs, fees, or other charges incurred by the holder incident to workout, foreclosure or its equivalent, retention, preserving, protecting, and preparing the underground storage tank or underground storage tank system prior to sale, re-lease of an underground storage tank or underground storage tank system held pursuant to a lease financing transaction or other disposition plus environmental investigation and corrective action costs incurred under any federal, State or local rule or regulation less any amounts received by the holder in connection with any partial disposition of the property and any amounts paid by the borrower subsequent to the acquisition of full title (or possession in the case of an underground storage tank or underground storage tank system subject to a lease financing transaction) pursuant to foreclosure or its equivalents. In the case of a holder maintaining indicia of ownership primarily to protect a junior security interest, fair consideration is the value of all outstanding higher priority security interests plus the value of the security interest held by the junior holder, each calculated as set forth in the preceding sentence.

(B) "Outbids, rejects, or fails to act upon an offer of fair consideration" means that the holder outbids, rejects, or fails to act upon within 90 days of receipt of a written, bona fide, firm offer of fair consideration for the underground storage tank or underground storage tank system received at any time after 6 months following foreclosure or its equivalents. A "written, bona fide, firm offer" means a legally enforceable, commercially reasonable, cash offer solely for foreclosed underground storage tank or underground storage tank system, including all material terms of the transaction, from a ready, willing, and able purchaser who demonstrates to the holder's satisfaction the ability to perform. For purposes of this provision, the 6 month period begins to run from the time that the holder acquires marketable title; otherwise, provided that the holder, after the expiration of any redemption or other waiting period provided by law, acted diligently to acquire marketable title; otherwise, the 6 month period begins to run on the date of foreclosure or its equivalents.

(d) Ownership of an underground storage tank and underground storage tank system.

(1) Ownership of an underground storage tank or underground storage tank system for purposes of corrective action. A holder is not an "owner" of a petroleum underground storage tank or underground storage tank system for purposes of compliance with the corrective action requirements of Section 57.12 of this Act, provided the person:

(A) does not participate in the management of the underground storage tank or underground storage tank system as defined in subsection (c); and

(B) does not engage in petroleum production, refining, and marketing.

(2) Ownership of an underground storage tank or underground storage tank system for purposes of the underground storage tank technical standards. A holder is not an owner of a petroleum underground storage tank or underground storage tank system for purposes of the underground storage tank technical standards provided that the holder:

(A) does not participate in the management of the underground storage tank or underground storage tank system as defined in subsection (c); and

(B) does not engage in petroleum production, refining, and marketing.

(e) Operating an underground storage tank or underground storage tank system.

(1) Operating an underground storage tank or underground storage tank system prior to foreclosure. A holder, prior to foreclosure or its equivalents, is not an operator of a petroleum underground storage tank or underground storage tank system for purposes of compliance with the corrective action requirements of Section 57.12 of this Act, or any other provision of this Act or of State or federal law, provided the holder is not in control of or does not have responsibility for the daily operation of the underground storage tank or underground storage tank system.

(2) Operating an underground storage tank or underground storage tank system after foreclosure.

(A) A holder who has not participated in management prior to foreclosure and who acquires a petroleum underground storage tank or underground storage tank system through foreclosure or its equivalents is not an operator of the underground storage tank or underground storage tank system for purposes of compliance with the corrective action requirements under Section 57.12 of this Act, or any other provision of this Act or of State or federal law, provided that the holder within 15 days following foreclosure or its equivalents, empties all of its underground storage tanks and underground storage tank systems so that no more than 2.5 centimeters (one inch) of residue, or 0.3% by weight of the total capacity of the underground storage tank system, remains in the system; leaves vent lines open and functioning; and caps and secures all other lines, pumps, manways, and ancillary equipment.

(B) In addition, the holder shall either:

(i) "permanently" close the underground storage tank or underground storage tank system in accordance with the regulations of the Office of the State Fire Marshal (41 Illinois Administrative Code Part 170, as amended); or

(ii) "temporarily" close the underground storage tank or underground storage tank system in accordance with the applicable provisions of the regulations of the Office of the State Fire Marshal (41 Illinois Administrative Code Part 170.620 and 170.670, as amended).

(C) A holder who acquires a petroleum underground storage tank or underground storage tank system through foreclosure or its equivalents is not an "operator" of the underground storage tank or underground storage tank system for purposes of this Act, the first 15 days following foreclosure or its equivalents, provided the holder complies with item (2) of Section (e).

(f) Actions taken to protect human health and the environment. A holder is not considered to be an operator of an underground storage tank or underground storage tank system or to be participating in the management of an underground storage tank or underground storage tank system solely on the basis of undertaking actions under a federal or State law or regulation, provided that the holder does not otherwise participate in the management or daily operation of the underground storage tank or underground storage tank system. Such actions include, but are not limited to, release reporting, release response and corrective action, temporary or permanent closure of an underground storage tank or underground storage tank system, underground storage tank upgrading or replacement, and maintenance of corrosion protection. A holder who undertakes these actions must do so in compliance with the applicable requirements of this Act.

(g) Financial responsibility. A holder is exempt from the requirement to demonstrate financial responsibility under any State law or rule, provided the holder:

(1) does not participate in the management of the underground storage tank or underground storage tank system as defined in subsection (c);

(2) does not engage in petroleum production, refining, and marketing as defined in item (2) of subsection (b); and

(3) complies with the requirements of subsection (e).

(Source: P.A. 89-200, eff. 1-1-96; 89-626, eff. 8-9-96.)