EPA’s “Standards and Practices for All Appropriate Inquiries” Rule (more commonly referred to as the “AAI Rule”) became effective November 1, 2006, and established a new, highly touted standard for environmental due diligence conducted by prospective purchasers in commercial real estate transactions. Now, a little more than six months after the date that many in the industry predicted would mark a sea change in the way environmental due diligence is conducted, the transition has proved relatively uneventful. Despite this apparently smooth transition, however, issues still bubble beneath the surface. In the context of the current real estate market, uncertainties regarding the protections provided by AAI, and various ambiguities in the rule, it is important to rely upon technical and legal expertise, and such tools as insurance, to protect oneself from the full range of potential environmental liabilities.

Background In January 2002, President Bush signed into law the Small Business Liability Relief and Brownfields Revitalization Act. Among other things, the law amended the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) by providing new defenses to environmental liability, namely the Bona Fide Prospective Purchaser (BFPP) defense and the Contiguous Landowner (CLO) defense. These new “landowner liability protections” were intended to incentivize the purchase and redevelopment of brownfield properties by relieving a purchaser from fear of the “joint and several” liability scheme. Previously, this made an owner of contaminated property strictly liable for environmental contamination on its property—no matter when, where or from whom such contamination originated. ...

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