Under the federal Superfund law, CERCLA, the current owner of a contaminated property can be held liable for cleanup costs even if they didn't cause the contamination. Congress created defenses for buyers who do their homework before acquiring a property. That homework is called All Appropriate Inquiries (AAI), and EPA's rule at 40 CFR Part 312 defines what it involves. A Phase I ESA that follows ASTM E1527-21 is the most common way to satisfy it.
The three landowner defenses
- Bona fide prospective purchaser (BFPP): available to buyers who acquire property after conducting AAI, even if they know about contamination, as long as they meet continuing obligations and aren't affiliated with a liable party.
- Contiguous property owner: for owners whose property is contaminated by migration from a neighboring property they don't own.
- Innocent landowner: for buyers who conducted AAI and did not know, and had no reason to know, of the contamination.
What AAI requires
AAI includes an inquiry by an Environmental Professional, including interviews, a review of historical sources and government records, a site visit and the EP's opinion. It also includes things the buyer (the "user") must do, such as searching for environmental liens, considering specialized knowledge, and considering whether the purchase price reflects the property's fair market value in light of any contamination.
Timing matters: key parts of the inquiry must be completed within 180 days before the acquisition date, and the inquiry as a whole within one year. See how long a Phase I is valid.
Continuing obligations after you buy
The Phase I isn't the end of it. To keep the BFPP and similar defenses, owners generally must take reasonable steps to stop or prevent releases, cooperate with authorities, comply with land use restrictions and institutional controls, provide legally required notices and respond to information requests. If your Phase I identified contamination, talk to an environmental attorney about what reasonable steps look like for your property.
Do you need AAI if your lender doesn't require a Phase I?
If you're buying commercial or industrial property, it's usually worth it. The cost of a Phase I is small compared with the potential cost of a cleanup you didn't cause. This article is general information, not legal advice; your attorney can advise on your specific situation.
Frequently asked questions
Does a Phase I guarantee I won't be liable for contamination?
No. A Phase I that satisfies AAI is a required step toward CERCLA defenses, but you must also meet the other conditions and continuing obligations. It also doesn't cover state-law liability in every state.
Can a Phase I prepared for someone else satisfy AAI for me?
Sometimes, if it's recent enough and updated as needed, but you must still complete your own user responsibilities. Ask your EP about reliance and updates.
This article is general information about environmental due diligence and is not legal advice. Requirements can change; confirm specifics with your lender or attorney.
