Comprehensive Environmental Response, Compensation and Liability Act

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) exposes property owners, past and present, to substantial expenses for the cleanup of hazardous materials from real property. With respect to this liability, it has become prudent to require that a professional environmental assessment be performed prior to the transfer of a property.

Those found liable for a hazardous substance release may be charged with the following:

• All costs of removal or remedial action incurred by State or Federal agencies;
• Any necessary costs incurred by other persons
• Damages for injury, destruction or loss of natural resources
• Costs of conducting health assessments or effect studies
• Costs for governmental enforcement actions (42 USC § 9607)

CERCLA was amended by the Superfund Amendments and Reauthorization Act (SARA) on October 17, 1986. SARA made several significant changes to CERCLA. Among other changes, SARA provided a mechanism by which a landowner could be held liable under CERCLA despite having no connection with the release of hazardous substances at a property. In concert with this extention of a landowner's potential liability, SARA also provided an important defense, known as the "innocent landowner defense," which is contingent upon a defendant having had no reason to know a property was contaminated prior to holding title (42 USC § 9607 (b)(3)(a) and (b)).

SARA establishes an innocent landowner defense by stating that "the defendant must have undertaken at the time of acquisition an all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability." SARA further states that in construing the "all appropriate inquiry" provision, the courts will take the following into account:

• Any specialized knowledge or experience on the part of the defendant;
• The relationship of the purchase price to the value of a property if contaminated;
• Commonly know or reasonably ascertainable information about a property;
• The obviousness of the presence/likely presence of contamination at a property;
• The ability to detect such contamination by appropriate inspection

Most lending institutions have established a policy requiring the performance of an "all appropriate inquiry" known as a Phase 1 Environmental Site Assessment (ESA), to establish the SARA innocent landowner defense requirement.