Innocent Purchasers Defense
Because the third party defense as generally not been available to purchasers who acquired title to contaminated property,  Congress enacted the "innocent purchaser's defense" in 1986. To take advantage of this affirmative defense, a subsequent  owner must establish that it did not know and had no reason to know that any hazardous substances were disposed of at the facility. To establish that it had no reason to know of the contamination, a defendant must demonstrate that it took "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability.” In determining whether there was an "appropriate inquiry," CERCLA requires that any specialized knowledge or experience of the innocent owner must be taken into account as well as the relationship of the purchase price to the contaminated property and whether the presence of contamination was obvious or could be detected by an appropriate site inspection.
In enacting this innocent purchaser's defense, Congress attempted to establish a course of conduct in real estate transactions and it is certain that sophisticated buyers will be required to perform a detailed site investigation to take advantage of this defense.   However, the courts have not consistently interpreted what constitutes an “appropriate inquiry.” For exarnple, in In Re Hemingway Transport, Inc.,the United States Court of Appeals for the First Circuit held the purchaser liable even though it had conducted a site inspection during the winter time but failed to observe drums submerged in a frozen wetlands. The court noted that the purchaser was a sophisticated developer who may have been familiar with the environmental risks of the site and may have realized that the purchase price represented a discount because of the contamination. As a result, the court remanded the case back to the bankruptcy court for further fact finding. In contrast, other purchasers who did not conduct any pre-acquisition investigation have qualified for the innocent purchaser’s defense even where there were obvious signs of contamination. 
	While the innocent purchaser cases are not uniform, it appears that this defense will be largely unavailable in most CERCLA cases even if the landowner defendant can survive summary judgment. The kind of information that courts may require to establish the innocent purchasers defense, such as whether the contamination was readily observable and what information was available at the time, will be difficult to establish for purchases that date back several decades. Even if an inspection was done and it failed to uncover contamination, many courts are likely to find that the investigation was inadequate, regardless of the documentation that may be provided by the owner showing that it complied with the commercially reasonable standards of the time. Thus, the existence of institutional controls will probably be sufficient to prevent a prospective purchaser or lessee from asserting the CERCLA innocent purchaser’s defense since the existence of the institutional controls should provide the party with knowledge that the site is contaminated. 
Many states have enacted their own innocent purchaser defenses. Like CERCLA, many states require the prospective owner or operator to conduct an appropriate inquiry while others specify the kind of a environmental site assessment that must be performed prior to taking title or occupying the property (e.g., M.S.A. 32620126) Some though, provide that subsequent purchasers will not be responsible for pre-existing contamination where the site has been remediated by the prior owner/operator in accordance with state standards (E.g. Pennsylvania Land Recycling and Environmental Remediation Standards Act, 35 P.S. 6026.501). Even where prospective purchasers may qualify for the innocent purchaser’s defense, some states provide that if the owners or operators fail to maintain institutional controls on their properties, they will lose their status as an innocent purchaser and forfeit their immunity from liability (See New Jersey P. L. 1997, ch.278, §20.)

(c) Copyright 1999 Lawrence Schnapf