U.S. EPA Adopts Final Rule for “All Appropriate Inquiry” in Environmental Assessments

Executive Summary

This fall, the United States Environmental Protection Agency’s new rule (Final Rule) will go into effect defining the scope of “all appropriate inquiry” that must be conducted prior to the acquisition of real estate in order for an owner to qualify for the defenses to liability under the federal Superfund law.

Lenders should take note of this for various reasons, including ascertaining that the environmental “Phase I” and related reports conducted in connection with their real estate loan closings comply with then current law and practice and that their borrowers will not risk liability greater than is customary or necessary by not being in compliance with the new rule. Additionally, should a lender assume ownership of a property, even though, from an environmental standpoint, its acquisition may come under existing law protecting foreclosing mortgagees (assuming appropriate protections have been taken by the lender), the lender will still want to know (as will a purchaser acquiring from the lender) that the property has previously met then current or applicable environmental review standards.