Contamination and Liability
“I’ve been offered a great deal on land”, she said. “Can you help me with the paperwork on it?”
“Sure”, I replied. “That’s what we do. Why don’t we start by you telling me about the land you want to buy, and the discussions which you’ve had with the present owner.”
“The Owner is willing to sell the land to me ‘dirt cheap’, if you’ll excuse the pun. The land is in the middle of town, and it’s been used as a gas station. It also has a nice little home on it which I could use as a rental.”
“How much does he want for it?”
“He said he’d sell it to me for $10,000. We’ve been friends for a long time, and the owner wants to get rid of it quickly so that he can retire and go fishing in the Upper Peninsula. He said that’s why he’s willing to sell it so cheaply.”
“Have you had an environmental assessment of the land?”
“If there’s ever been any use of the land which could have caused a release of contaminants in the soil, and a person buys the land, then the new owner is liable for the cost of cleanup, even if the new owner did not cause the contamination.
“Normally, if there is significant contamination, the cost of cleanup can run to many millions of dollars.”
“That’s nuts!”, she said. Why should I have to pay for what someone else did?”
“Because Congress and the State Legislature said so,” I replied. “The politicians decided that if you buy the land, you buy the problems.”
“You’re the lawyer. Isn’t there some loophole?”
“There’s the ‘innocent purchaser’ defense,” I replied.
“Well that’s me!”, she said. “I’m as innocent as the new-blown snow.”
“Not so fast”, I responded. “To be an ‘innocent purchaser’ you have to have made a proper inquiry on whether there’s been a release of contaminants.”
“What’s a ‘proper inquiry’, anyway?”
“Normally, you have to hire a properly qualified company to conduct environmental assessments. There are three kinds, called ‘Phase One’, ‘Phase Two’, and ‘Phase Three’.
“What are those?”
“The first assessment, Phase One, is an examination of the land records to see if any past owner was engaged in a business which may have caused a release of contaminants. However, Phase One does not examine the land itself.
“In your case, you know that it was a gas station. So, you need a Phase Two. That’s an actual examination of the land itself, both the building, to see if there are substances like asbestos, and soil samples to test the ground.”
“If you pass the Phase Two, you can generally assert an ‘innocent purchaser’ defense if contaminants are discovered later.”
“Then what’s a Phase Three?”
“Phase Three relates to what you can do if contaminants are found in the building or the land. The Phase Three tells you what you would have to do to remove the contaminants.”
“Would I have to pay for these environmental assessments?
“That’s a matter of contract”, I replied. “You can put who will pay in your purchase agreement.”
“This is a lot to think about. I want the land, but I don’t want to risk any costs related to contamination. Let me think about this.”
“That’s a good idea. Since these environmental laws were enacted, the danger of contamination needs to always be kept in mind.”