6. STRUCTURE ACQUISITIONS TO REDUCE RISKS

Any decision to purchase or develop contaminated land should consider the nature and scope of the contamination, the anticipated costs or cleanup, any activity and use limitations, and the likelihood of future liability to government or other plaintiffs. Contract clauses, discussed below, are only backstops against financial exposure. Better than mere legal language is to obtain control of the information, the cleanup, and the timing of ownership.

One way to control liability is to delay the closing or acquisition, and thus delay the ownership of the waste, until the cleanup is complete. Another way is to hold back purchase money or put it in escrow until the property is clean enough (according to the buyer's experts). Yet another way is for the buyer to conduct a cleanup (so it is done right) and deduct cleanup costs from the purchase price. Or close on the property with the seller granted access to do the cleanup, at no cost to the buyer. Or create a contract sharing the cleanup duties between the buyer and seller.

Be sure to include explicit division of labor among the parties covering preliminary investigations, legal notices to agencies, remedial action plans, supervision of contractors, and conducting the cleanup.

Parties could separate ownership interests where contamination is involved. Simply put, parties could purchase less than a fee interest in the property, where underground contamination is an issue. Additionally, where underground storage tanks are an issue, parties might wish to exclude an underground storage tank from the parcel that is being purchased.

Potential purchasers ultimately may decide to lease a contaminated parcel, in an attempt to avoid liability. Some courts have held that tenants who did not possess control over the property were not operators. Tenants which are active participants in management decisions, however, or which control the property’s management, have been held liable as operations under Superfund.

Under CERCLA, conducting “All Appropriate Inquiries” provides certain liability protections to potential landowners. To establish that the owner did not know and had no reason to know that contamination was located at the site, in the event that liability is asserted in litigation, the defendant must demonstrate that all appropriate inquiries were performed and “the defendant took reasonable steps to stop any continuing release; prevent any threatened future release; and prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance.”

For property purchased before May 31, 1997, the American Society for Testing and Materials standards will satisfy the “All Appropriate Inquiry” rule. Otherwise, all appropriate inquiries must be performed before the site is retained and in accordance with generally accepted standards. A complete inquiry considers all of the following:

• the results of an inquiry by an environmental professional;
• interviews with past and present owners, operators, and occupants of the facility;
• reviews of historical sources to determine previous uses and occupancies;
• searches for recorded environmental cleanup liens against the facility that are filed under federal, state, or local law;
• reviews of federal, state, and local government records concerning disposal, storage, handling, generation, treatment, and spills of contamination at or near the facility;
• visual inspections of the facility and of adjoining properties;
• specialized knowledge or experience on the part of the defendant;
• the relationship of the purchase price to the value of the property, if the property was not contaminated;
• commonly known or reasonably ascertainable information about the property; and
• the degree of obviousness of the presence or likely presence of contamination at the property, and the ability to detect the contamination by appropriate investigation.