Vol. 13, No. 6, Pg. 36. The new prospective purchaser exception to enviornmental liabilaty.

Author:By Ben A. Hagood Jr.

South Carolina Lawyer


Vol. 13, No. 6, Pg. 36.

The new prospective purchaser exception to enviornmental liabilaty

36The new prospective purchaser exception to enviornmental liabilatyBy Ben A. Hagood Jr.36On January 11, 2002, the President signed the Federal Small Business Liability Relief and Brownfields Revitalization Act (the "Act" or the 'Brownfield Revitalization Act") into law. This Act makes significant changes to the Comprehensive Environmental Response Compensation and Liability Act of 1980, known as CERCLA or Superfund, which is the primary statute used by federal and state governments and private parties for cleanup and liability allocation for environmentally contaminated property. The Act creates new liability exceptions for bona fide prospective purchasers and owners of contiguous properties, amends the innocent landowner defense and creates de micromis liability exemptions for small quantities of hazardous substances and exemptions for small businesses for municipal solid waste. The Act also establishes new brown-fields grant funding.

The focus of this article will be on the new bona fide prospective purchaser exception and the amendments to the innocent landowner defense. This article will discuss the likely effects of the Act under federal and state law for purchasers of contaminated property in South Carolina including the applicability of federal prospective purchaser agreements and state voluntary clean up contracts.

Liability for landowners

CERCLA makes the current owner of contaminated property liable for environmental contamination at the property, regardless of fault. 42 U.S.C. § 9607. This strict liability has causedmany contaminated or potentially contaminated properties to remain dormant and unproductive for years. Prospective purchasers are typically unwilling to purchase properties where unknown liabilities could easily exceed the fair market value of the property.

This unfortunate result led to federal and state brownfields initiatives beginning in the early 1990s. A classic "brownfield" is former industrial property that is either contaminated or perceived to be contaminated and, because of liability risks, market forces will not typically put the property back into productive use. Thus, the strict CERCLA liability often caused the unintended environmental consequences of leaving former industrial sites fallow while encouraging development of "greenfields" or undeveloped land. To counteract these undesirable results, various federal and state policy and legislative initiatives have sought to give liability protection to prospective purchasers who are not responsible for the contamination. The Brownfields Revitalization Act continues this trend by creating the new bona fide prospective purchaser exception and clarifying the applicability of the innocent landowner defense.

The bona fide prospective purchaser exception

The "bona fide prospective purchaser" exception is applicable to purchases of property after January 11, 2002, where the purchasing landowner:

* was not responsible for the disposal of hazardous substances at the property and the disposal occurred before acquiring ownership;

* made "all appropriate inquiries into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices" (see

37 discussion of the innocent landowner defense below);

* provides all legally required notices with respect to the discovery or release of any hazardous substances at the facility;

* exercises appropriate care with respect to hazardous substances found at this facility by taking reasonable steps to stop any continuing release; prevent any threatened future release; and prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance;

* provides full cooperation, assistance and access to persons conducting...

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