COMMERCIAL & INDUSTRIAL PROPERTY TRANSFERS
Today’s real estate market is largely influenced by environmental concerns. The extensive environmental liabilities resulting from leaking underground storage tanks, buried industrial waste, poor quality fill material, improper handling of hazardous materials, historic PCB usage, and spills have significantly changed the way business is conducted with regard to the ownership, management, and transfer of real property. Anyone having a financial interest in real estate needs to know if potential environmental problems may involve them in expensive cleanup and lengthy litigation.
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund, imposes liability on responsible parties, including but not limited to: present owners and/or operators of the facility, and prior owners and/or operators who owned or operated the facility at the time of disposal of any hazardous substance. There are only three defenses available to CERCLA liability, with the most common being the “third party defense.”
INNOCENT LANDOWNER DEFENSE & APPROPRIATE INQUIRY
In 1986, Congress increased the scope of this defense, creating a special class of the third party defense sometimes called the “innocent landowner defense.” Innocent landowners can escape CERCLA liability if they acquired the property after the disposal of hazardous substance (among other qualifications), and at the time of the property acquisition, the defendant must have undertaken all appropriate inquiry into the previous ownership and uses of the property.
PHASE I ENVIRONMENTAL SITE ASSESSMENT
The burden is on lenders and potential owners of real estate to make a duly diligent effort to research the environmental hazards on the property they acquire title to, foreclose on, maintain a security in, or assist in managing. The Phase I Environmental Site Assessment evaluates potential and existing hazards and is an essential element in establishing “innocent landowner” status in property transactions. It is the first step in evaluating a property’s environmental status and can help limit ultimate liability should the property be found to pose an environmental risk.
DUE DILIGENCE, ASTM STANDARD, & PRELIMINARY ASSESSMENT
The advent of the routine Phase I audit was the result of this heightened awareness and the evolution of legal liability theory under the Superfund statute. Although there are currently no federally enforceable requirements for conducting a Phase I to establish due diligence, state requirements and industry established guidelines, such as the ASTM Standard E1527-05, have been developed. For instance, under the New Jersey Spill Compensation and Control Act, a person must perform a Preliminary Assessment, as well as a Site Investigation if potential contaminants or concern are discovered, to demonstrate “appropriate inquiry” in order to qualify as an “innocent purchaser.”
SITE INVESTIGATION & INNOCENT PURCHASER
AESI personnel have performed hundreds of Phase I Environmental Site Assessments, Preliminary Assessments, and Site Investigations since 1997. Our credentials far exceed the requirements of all major financial institutions and have been refined over the years to accommodate changes in legal guidance, client objectives, and state regulations.