Understanding CERCLA Liability: What Property Owners Need to Know Before Buying a Brownfield

When considering the purchase of an industrial or commercial property, potential purchasers should bear in mind that, under federal and California, environmental law, they can inherit environmental liability for pre-existing contamination.

The Liability Trap: Strict, Retroactive, and Joint and Several

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”) imposes strict, retroactive, and joint and several liability. Strict means it does not matter whether the property owner was careful or negligent with regard to environmental matters. Retroactive means it reaches back to pollution that occurred decades before acquisition of the property. And joint and several means the government or private parties such as neighboring property owners and future purchasers can pursue the property owner for the entire cost of a cleanup, even if others contributed to the contamination and the owner contributed to none of it. A buyer who takes title to a contaminated parcel can thus become liable for remediation the day the deal closes. This cost can dwarf the purchase price. The key to avoiding this is pre-purchase environmental due diligence.

The Bona Fide Prospective Purchaser Defense

For years after the passage of CERCLA in 1980, this risk kept buyers away from the hundreds of thousands of contaminated but potentially productive “brownfield” sites across the country. Nobody wanted to buy a contaminated property and the cleanup liability that came with it. Congress addressed this in 2002 with the Brownfields Amendments to CERCLA, which created the Bona Fide Prospective Purchaser (“BFPP”) defense.

The BFPP defense is powerful because it changes the liability calculus. It allows a purchaser to buy a property with full knowledge of contamination and still avoid owner or operator liability, provided they satisfy a specific set of conditions and keep satisfying them after closing.

BFPP status is not automatic. To claim this status, a purchaser generally must show:

• that all disposal of hazardous substances occurred before acquisition;
• that “all appropriate inquiries” were completed before purchase;
• that all legally required notices were provided;
• that reasonable steps in connection with “appropriate care” were taken to stop continuing releases and limit exposure;
• that the buyer cooperates with those conducting investigation and cleanup actions;
• that it complies with land use restrictions and institutional controls;
• that it responds to information requests; and
• that it has no affiliation with a party otherwise responsible for the contamination other than being in the chain of title.

Two points deserve emphasis. First, “all appropriate inquiries” is satisfied by a obtaining a pre-closing Phase I Environmental Site Assessment report performed to the current American Society for Testing and Materials (“ASTM”) standard by a qualified environmental professional. A Phase I report requires a site visit and a review of historical records such as agency files, aerial photographs, and prior uses to determine whether there are “recognized environmental conditions,” defined to mean essentially the known or likely release or threatened release of hazardous substances or petroleum products at the property. If the Phase I report identifies recognized environmental conditions, a Phase II, consisting of actual soil and groundwater testing, may be the logical next step. Critically, however, Phase II testing may not be required for BFPP status, even if a recognized environmental condition is identified in the Phase I report. A Phase I report must also be current, with key components no older than 180 days before closing.

Second, BFPP status is not a one-time box the buyer can check at closing. It is a set of continuing obligations. Buyers have lost the defense by failing to take reasonable steps after taking title. And because the defense is rarely tested until a regulator or another party actually files a lawsuit or other claim, the property owner may not learn whether its protection holds until years later, which is exactly why the work must be done correctly at the front end.

Local governments face their own version of this analysis. CERCLA provides liability protections for government entities that acquire property involuntarily, such as through tax delinquency, bankruptcy, abandonment, or eminent domain, and governments can also qualify as BFPPs. But those protections still depend on conducting all appropriate inquiries and honoring the same continuing obligations.

Building Due Diligence Early into the Transaction

The practical takeaway is to build environmental due diligence into the transaction from the start. The property purchaser should engage a qualified environmental consultant early, and involve environmental counsel before it is contractually committed. The purchase agreement should give the buyer the right and enough time to complete a Phase I report and spell out its rights to terminate, to extend, or to renegotiate if recognized environmental conditions are identified. Purchase agreements should also allocate liability for environmental matters as between the buyer and seller in accordance with the business deal. Purchasing a brownfield can be a genuine opportunity. But the difference between a smart acquisition and a costly liability often depends on careful pre-closing environmental due diligence.

Brian E. Moskal is a partner at Greenberg Glusker LLP in Los Angeles, where he represents clients in environmental litigation and counseling matters, with a focus on contaminated sites, water and wastewater issues, and environmental insurance recovery. He advises industrial companies, property owners, and municipalities on matters arising under the Clean Water Act, CERCLA, RCRA, and California law, and has handled investigation and enforcement matters before the U.S. EPA and California Regional Water Quality Control Boards. Brian has been recognized by Chambers USA as a Leading Lawyer in Environmental Law (2021–2026), Best Lawyers in America (2026), and Southern California Super Lawyers for Environmental Litigation. He earned his J.D. from UC Berkeley School of Law and his BBA, with high honors, from the University of Texas at Austin.