Gaining “Innocent Purchaser Status” on a Contaminated Property

Innocent Landowner Defense

A residential community known as The Love Canal near Niagra Falls, NY was developed over a toxic waste dump, and residents developed health problems, which came to the point of public concern in 1979. In 1980, the Comprehensive Environmental Response Compensation and Liabilities Act (CERCLA, commonly known as Superfund) was passed by the U.S. Congress to protect the public from environmental health hazards.

The “Innocent Landowner Defense” was created as a result of 1986 amendments to the act. The law states that an “innocent landowner defense” can be claimed if “all appropriate inquiry consistent with good commercial practice” is performed.

Court-Quality Data

The purpose for performing environmental assessments prior to acquiring property is to defend the property owner from environmental liability if regulated environmental concerns exist at the site. CERCLA is very strict regarding liability, and if appropriate risk management techniques are not employed prior to site acquisition, the property owner is typically found to be the primary responsible party. The Innocent Landowner Defense (a.k.a. Innocent Purchaser Status) must be based on an environmental report that would stand up in court.

An environmental assessment has very little value if diligence and competence cannot be demonstrated. Thus, appropriate inquiry is critical to defending potential liabilities. The firm performing an assessment must be professional, experienced, insured, and financially secure in order to appropriately defend their work in court.

Appropriate Inquiry

“Appropriate inquiry” is site specific. The level of diligence that should be performed at a site varies according to historical and present land uses on the site and in the study area. Some properties require diligent assessments and sampling to evaluate environmental quality. Other sites are appropriately investigated with site historical and regulatory research. The American Society of Testing and Materials (ASTM) has prepared nationally recognized standards that are acceptable guidelines to determine appropriate inquiry.