Environmental Due Diligence in Real property Transactions
People who plan to transact with real property: buy, sell, refinance;
or even just be the facilitators of the transaction, have various
factors to consider. One is the possibility that the land may be
contaminated; and not all land contamination maybe straight off visible
to the naked eye.
might have taken place years ago, long before the interested party had
anything to do with the land. It might even have happened several
generations of landowners ago.
How could one then ensure that they would not be held liable for the
damage that’s been done to the land, to neighboring properties, or even
the contingent damages that may befall a ruined transaction?
To prevent this situation, the EPA has established the “All Appropriate
Inquiry (AAI)” process: evaluating the environmental conditions of a
property in question and determining the potentials for environmental
The AAI requirements apply to any party who may potentially need to
show they are not liable, either as an innocent landowner, a bona fide
prospective purchaser, or a nearby property owner.
The AAI Rule requires that the investigative work be done by a
qualified Environmental Professional, and it establishes the needed
qualifications. Some of the required research includes interviews
with past and present owners, operators and occupants; reviews of
historical sources of information; reviews of federal, state, tribal
and local government records; and visual inspections of the facility
and adjoining properties.
In following the AAI requirements, the Users of the reports obtain
immunity from a liability to various federal and state laws that seek
to penalize responsible parties for the environmental damage. The
AAI practice of investigation also provides a good commercial approach
to investigating various other environmental pitfalls that could be
associated with real estate transactions.
A key factor in conducting AAI and/or similar processes is the
engagement of professional experts. In many cases, the cost of the
investigation dwarfs in orders of magnitude against the financial risks
of the transactions. Our firm has been in the forefront of the AAI
process since 1987. Feel free to contact us for any
question or need.