A property purchaser's tool box--part two: select the right tools to protect yourself from environmental liabilities.

• Position: Legal Brief

A few months ago, I wrote A Property Purchaser's Tool Box. Working in an auto garage as a young man, I learned that the right tool made every job easier, and Tools Part One identified the availability and importance of selecting the right legal/technical tool to secure environmental liability protection in the purchase of real estate. I have received a lot of comments from readers (mostly amazed that I knew how to weld--apparently, a Zeus-like task for a mere lawyer) regarding the tools in the box and their use. These discussions lead to interest in Tools Part Two.

Part One identified several different tools in the box: the ASTM Phase I Environmental Site Assessment (ESA), reasonable steps letters, insurance, state immunity programs and brownfields policies, to name a few. While each tool has its purpose, I identified the ESA as the fundamental tool for liability protection. However, although the ESA is essential to liability protection, it is not the end all be all. Minimizing liability is certainly a principle goal, but it is not necessarily the only consideration.

Operational integrity

New property owners frequently come to me expressing concern that they secured an ESA only to find an issue on the land that interferes with property use. The frustration comes because the issue was not identified by the ESA. It may be that the property is missing (or the previous owner failed to transfer) permits necessary to operate, or an environmental condition exists that cannot be disturbed, or there are conditions that require additional capital.

I refer to this concept as operational integrity--the ability to use the property for its intended purpose. While selecting appropriate tools and structuring property review, one must determine the extent to which operational integrity is a concern.

Examining the purpose and scope of an ASTM Phase I ESA reveals how the operational integrity issue may be overlooked. Per the ASTM standard, the purpose of the ESA "is to define good commercial and customary practice ... intended to permit a user to satisfy one of the requirements to qualify for ... CERCLA ... landowner liability protections ... ."

To achieve this objective, ASTM sets a standard scope for environmental professionals to follow. A typical ESA then theoretically addresses these standard scope items. An ESA that includes standard scope elements will establish one of the elements of all appropriate inquiry and the basis for certain liability...