Due Diligence, Liability, and Transactional Considerations
Due diligence and defenses
All appropriate inquiries (AAI) is the threshold for the CERCLA landowner defenses. The three common defenses are the innocent landowner defense, the bona fide prospective purchaser (BFPP) defense, and the contiguous property owner defense. Each requires AAI before acquisition (or appropriate timing), appropriate care, reasonable steps, cooperation, and compliance with land use restrictions and information requests. The BFPP defense is available to a purchaser who knows about contamination but takes the required steps; the innocent landowner generally did not know at acquisition.
Transactional tools
Purchase agreements often include environmental representations and warranties, indemnities, escrow holdbacks, and conditions to closing. Phase I is typically a condition precedent; Phase II may be required if RECs are found. Environmental insurance can transfer risk. Institutional controls (e.g., deed restrictions) and engineering controls (e.g., caps, vapor barriers) manage residual risk.
Traps
AAI alone does not create a defense; the other statutory requirements must be met. A purchaser who fails to take reasonable steps after learning of contamination can lose the BFPP defense. Do not confuse contractual indemnity with statutory liability; CERCLA liability can still attach to the buyer. The timing of AAI matters; it generally must be conducted or updated within one year before acquisition, with certain components within 180 days.
Rule of thumb
Due diligence protects the buyer only if it is followed by appropriate care and reasonable steps. Contractual protections shift cost but do not erase regulatory liability.