Environmental Due Diligence in the Garden State
Are you doing the right environmental due diligence when purchasing property in New Jersey?
Nova Consulting Group recommends that a purchaser of New Jersey property conduct both a Phase I Environmental Site Assessment (“Phase I”) and a Preliminary Assessment prior to acquisition. Here are some reasons why:
In most states, conducting a Phase I satisfies a buyer’s “all appropriate inquiries” requirement for a limitation to liability under that state’s environmental liability law; however, not so in New Jersey.
In New Jersey, “appropriate inquiry” under the Spill Act is defined as “the performance of a Preliminary Assessment, and a Site Investigation, if the preliminary assessment indicates that a site investigation is necessary” (N.J.S.A. 58:10-23.11g(d)). The Preliminary Assessment and Site Investigation must be conducted in accordance with the Technical Requirements for Site Remediation, N.J.A.C. 7:26E, in order to satisfy a requirement of the Spill Act “innocent purchaser” defense to liability.
The scope of a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, also known as Superfund) Phase I and a Spill Act Preliminary Assessment are similar but not identical. Therefore, a buyer cannot rely on a CERCLA Phase I to satisfy the Spill Act appropriate inquiry requirement for the Spill Act innocent purchaser defense to liability. Recently, a New Jersey court rejected arguments that reliance on an EPA Mini Pollution Report satisfied the Spill Act requirement for an innocent purchaser defense to liability. The court specifically stated that the Spill Act innocent purchaser defense was unavailable because the purchaser failed to conduct a Preliminary Assessment as defined in the Spill Act.
So, what does Nova recommend for property acquisition in New Jersey?
Nova recommends conducting a combined Phase I/Preliminary Assessment report that includes the elements of both a Phase I and a Preliminary Assessment prior to purchase of property in New Jersey. This will save the buyer both time and money and will simplify the environmental due diligence process in the state. Nova also recommends that a buyer of New Jersey commercial or industrial property, when applicable, retain an experienced environmental attorney licensed in the state to counsel the buyer on potential environmental risks and liabilities associated with the property and to assist the buyer in satisfying the requirements for limiting potential liability under CERCLA and the Spill Act.
Keep in mind that a buyer can, if needed, but is not required to hire a Licensed Site Remediation Professional (LSRP) to conduct a Preliminary Assessment and Site Investigation for appropriate inquiry purposes (N.J.S.A. 58:10B-1.3(a)). In addition, a Response Action Outcome, which is the final document issued after remediation is complete, is not required for a Preliminary Assessment and Site Investigation conducted for appropriate inquiry purposes unless those investigations identify contamination at the property that requires remediation.
Mr. George is a New Jersey Department of Environmental Protection (NJDEP) LSRP and has over 20 years of experience working in environmental due diligence in New Jersey. He has conducted over 500 environmental reports at all types of properties in New Jersey and throughout the United States.