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Look Before you Leap when Considering Purchasing Contaminated Property

Written on November 27, 2018

There was a time when buyers had two options upon discovering that a tract of real estate was contaminated: The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) required them to walk away from the deal or clean it up. Familiarly known as “Superfund,” this statute assigns liability to current owners of polluted properties, regardless of fault. The only way to avoid incurring liability would be to thoroughly investigate the site and not find evidence of contamination, making you a truly innocent purchaser.

A 2002 change to CERCLA added a new category to insulate buyers from legal responsibility. The Brownfield Amendments carved out another exception for a “bona fide prospective purchaser” (BFPP). Eligible buyers could purchase a contaminated site, with knowledge of its state, and not be liable. If you qualify, there are significant investment opportunities. However, you still have certain responsibilities as a BFPP. A Florida construction law lawyer can help you navigate the process, which has become the standard when purchasing real estate.

Pre-Purchase Due Diligence

A BFPP must engage in environmental due diligence, which involves an assessment of the site’s current condition and potential for pollution. This part of the process occurs before the real estate closing, giving you the opportunity to investigate and gather data to help you make an informed decision. If you discover any problems, you can work with a contracts lawyer to exit the agreement or proceed.

Fill the Gaps for Phase I Environmental Site Assessments

Phase I ESAs are completed by third parties to identify contamination on property according to certain standards. Some may be insufficient for purposes of the BFPP defense. There may be gaps in interviewing former owners regarding occupancy or land usage going back to 1940 and/or the property’s first development. If the disparities are significant, that could affect your duty to conduct proper due diligence. You could lose your status as a BFPP and become liable for clean-up.

Continue to Do Your Homework

When the Phase I ESA reveals certain environmental issues, you must decide whether additional investigation is necessary. Your due diligence may include a sampling of soil, groundwater, and other factors. Maintaining your position as a BFPP requires that, after you close, you take reasonable steps to prevent further contamination. The reasonableness standard may vary, and it may require that you move to Phase II testing.

Understand Continuing Legal Obligations

Even once you establish BFPP status, you must maintain it. CERCLA requires ongoing obligations, such as providing designated notices, cooperating with relevant agencies, providing data upon request, and implementing measures to cease potential releases of contaminants.

Talk to a Florida Business Law Attorney About Buying Contaminated Property

If you have questions about business litigation, contract disputes, and other issues regarding the purchase of contaminated real estate, our team at Clearwater Business Law can offer knowledgeable guidance. Please (727) 785-5100 to schedule a consultation with a business litigation lawyer who can provide more information on your options. We represent businesses in Clearwater, St. Petersburg, and throughout Pinellas County, FL, and we are here to help.

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