Environmental Liabilities – CERCLA Defenses and User Obligations

Property buyers who fail to perform all appropriate inquiry before acquiring real estate may not qualify for defenses to CERCLA liabilities. “All Appropriate Inquiry” (AAI) is a process defined by EPA and requires both an assessment by an environmental professional, usually called a Phase I, and additional inquires by the party seeking to utilize CERCLA defenses (the defendant).  Unfortunately, many property buyers don’t understand that qualifying for CERCLA defenses requires them to do more than obtain a Phase I Environmental Site Assessment.   

According to EPA’s final rule on all appropriate inquiry, in addition to the Phase I, the defendant must conduct the following additional inquiries and take into the following information:

  • A search for environmental liens;
  • Specialized knowledge of the defendant concerning the subject property, the area surrounding the subject property, the conditions of adjoining properties, and any other experience relevant to the inquiry;
  • The relationship of the purchase price to the value of the property, if the property was not contaminated;
  • Commonly known or reasonably ascertainable information within the local community about the subject property
  • The degree of obviousness of the presence or likely presence of contamination.

The defendant may engage the environmental professional to conduct a search for environmental liens; however, this is not part of the typical Phase I scope of work. As required by EPA’s final rule, all other inquires must be conducted and considered by the defendant, not by the consultant.

Many environmental consultants provide clients with a questionnaire addressing these issues. Inclusion of the completed questionnaire in the Phase I can help to document the defendant’s satisfaction of AAI’s requirements for additional inquiries; however, these questionnaires are not always returned to the EP. In addition, some clients routinely forward the questionnaire for completion by a property manager, seller or broker. Since EPA does not allow for delegation of the responsibility for these additional inquiries, completion of the questionnaire by others does not fulfill the defendant’s responsibility to conduct all appropriate inquiry.

Sometimes, qualifying for defenses to CERCLA liability is not the primary reason for the completion of Phase I assessments. When it is, though, buyers should be careful to assure satisfaction of the additional inquiries required to qualify for defenses to CERCLA liability.

You can find more information concerning all appropriate inquiry at EPA’s Brownfields site. Additional information concerning additional inquiries required of the defendant can be found at Section 312.22 of 40 CFR 312.

http://www.epa.gov/brownfields/aai/.

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