ALP: What is All Appropriate Inquiry
Purchasers of previously developed commercial or industrial property may incur substantial liabilities if the property is determined to be contaminated by hazardous substances. Federal and Kentucky law provide liability protection to purchasers who did not know and had no reason to know that the property was contaminated at the time of purchase. To qualify, the purchaser must investigate the property in accordance with the All Appropriate Inquiry Rule, 40 C.F.R. Part 312. This Rule substantially changes the prior practice for conducting environmental site assessments.
The changes create potential traps for the unwary, including:
- The inquiry must be conducted by an environmental professional. Since there are no federal or Kentucky programs for certification of environmental professionals, the inquiry should be conducted by a Professional Engineer or Professional Geologist with at least three years of relevant experience;
- The inquiry must assess the relationship of the purchase price to the value of the property if not contaminated. The environmental professional may not be qualified to do so; and
- The inquiry report is good for only one year, and some components must be updated no less than 180 days before the property transfer. Failure to update may void the liability protection.
The inquiry is subject to more stringent requirements, including:
- Interviews must be conducted with past owners of the property;
- Historical sources of information must be assessed back to the first development of the property;
- Review of governmental records must include public health records; and
- Visual inspection of adjoining properties must be conducted. Reasonable efforts must be made to gain access to the adjoining properties. If that access is denied, then the visual observation must be made from accessible points providing the best vantage of the adjoining properties.
Contracts for the inquiry should require investigation in accordance with the Rule or the ASTM E1527-05 Standard Practice for Environmental Site Assessments. The inquiry report should be reviewed to confirm that all required components are included. With a little care, liability for environmental contamination can be avoided.