During a property transaction, prospective purchasers are often required to conduct a Phase I ESA to satisfy the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability (Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601)), and the Environmental Protection Agency (EPA) All Appropriate Inquiry (AAI) Rule, Subsection 312.10 of 40 Code of Federal Regulations 312 (40 CFR §312). CERCLA is a federal law, and provides landowner liability protections under that particular law. What a Phase I ESA does not necessarily do, however, and as is made clear in the Phase I standard itself (ASTM E 1527-13, section 1.1.4), is address requirements of state or local laws. Users of a Phase I ESA are cautioned in the ASTM standard that federal, state, and local laws may impose environmental assessment obligations that are beyond the scope of the Phase I standard itself.
Like many other states, New Jersey has enacted its own innocent purchaser defense that requires a property owner to demonstrate that, at the time they acquired the property, they did not know and had no reason to know that any hazardous substance had been discharged at the property, by performing an "all appropriate inquiry" prior to purchase of the property. As stated in the New Jersey Spill Compensation and Control Act (Spill Act), any person who owns real property acquired on or after September 14, 1993 on which there has been a discharge prior to the person's acquisition of that property and who knew or should have known that a hazardous substance had been discharged at the real property, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs no matter by whom incurred [N.J.S.A. 58:10- 23.11g(c)(3)].
However, contrary to most states, New Jersey has not adopted the federal All Appropriate Inquiries rule (which can be satisfied by performing a Phase I ESA) but instead has its own unique definition for satisfying "all appropriate inquiry." Under N.J.S.A. 58:10-23.11g(d)(2), an "all appropriate inquiry" is defined as the performance of a preliminary assessment (PA), and site investigation, if the preliminary assessment indicated that a site investigation is necessary.
In a January 14, 2016 the Superior Court of New Jersey ruled, a party buying property in New Jersey after 1993 must obtain a Preliminary Assessment Report (PAR) in accordance with NJDEP rules in order to have a chance of obtaining innocent purchaser protection in the state of New Jersey.
In addition to standalone Phase I and Preliminary Assessment reports, at Acer Associates (ACER) we also provide our clients a single, combined PA/Phase I report that concurrently satisfies both federal and state innocent purchaser protections.