Industrial property transfers are drawing renewed interest from both domestic and foreign investors. These assets can be attractive, but US environmental law imposes strict, often joint and several, liabilities that can create significant risk for buyers.

The current regulatory landscape, including the US Environmental Protection Agency’s (EPA) recent designation of perfluorooctanoic acid (PFOA) and perfluorooctaneusulfonic acid (PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), has heightened disclosure and liability stakes. This designation is subject to ongoing litigation, adding further uncertainty. In this environment, successful transactions depend on rigorous environmental diligence, clear allocation of responsibility among buyers, sellers, and insurers, and deal structures that anticipate regulatory change. When executed properly, these strategies enable deals to close on time, at a price that accounts for quantified environmental costs, and with clearly defined accountability for remediation.

This article outlines eight steps industrial property purchasers can take to mitigate uncertainty.

1. Where financial considerations permit, buyers should purchase a company’s assets, and not corporate stock. In an asset purchase, it is easier to allocate liabilities between the buyer and seller so that environmental liabilities are not unwittingly assumed.
2. Diligence should satisfy ASTM E1527‑21 and the All Appropriate Inquiries rule to preserve defenses and support underwriting, with particular attention to per- and polyfluoroalkyl substances (PFAS) pathways and vapor intrusion.
3. Negotiating win‑wins often requires understanding the costs associated with known contamination and the risks associated with data gaps.
4. Risk mitigation should be understood in layers, combining indemnities, escrows, and to the extent it is available, fit‑for‑purpose environmental insurance with state program tools like no‑further‑action letters.
5. Early, structured engagement with regulators can de‑risk timelines and improve remedy optionality.
6. Post‑closing value creation depends on deliberate execution of continuing obligations, access rights, and institutional control maintenance.
7. Evolving PFAS rules now change the liability calculus and the diligence scope, even as courts review EPA’s 2024 designations.
8. Deal teams should assume the unexpected and bake in mechanisms to equitably share novel regulatory shocks.

Deal Structure and the Corporate Baseline

The structure of any transaction is the first and often most effective tool for managing legacy environmental liability. Asset purchases, as opposed to stock purchases, allow buyers to select which liabilities to assume and to ring-fence legacy issues within the seller’s retained entity. Using a single-purpose subsidiary to acquire assets can preserve corporate separateness and limit recourse to the entity where risks reside. Assumption-of-liability clauses can be drafted to exclude pre-closing environmental obligations, with targeted carve-ins for specifically priced items. Indemnities, escrow arrangements, and environmental or representations-and-warranties insurance can provide additional protection. However, under CERCLA and state law, successor liability may still attach if the transaction is deemed a de facto merger, mere continuation, or fraudulent transfer. To mitigate this, parties should maintain corporate formalities, ensure adequate capitalization, and avoid hallmarks of continuity.

For real estate, structuring ownership through a property-holding company that leases to the operating company can further isolate site risk, while embedding environmental covenants and access rights. Early planning for permit transfers or reissuance, and clear allocation of compliance and corrective-action duties through environmental management agreements, are often essential. These measures reduce tail risk and provide both parties with clarity on retained and transferred liabilities.

Setting a Legal and Technical Baseline

Diligence is the next critical step in managing environmental risk. Under CERCLA, buyers can potentially limit their liability by complying with the “All Appropriate Inquiries” (AAI) rule, which is the statutory framework for landowner liability protections. EPA now recognizes ASTM E1527-21 as the operative standard for Phase I Environmental Site Assessments (ESAs), with the previous standard retired as of February 2024. AAI defenses are highly process- and timing-dependent. The 180-day shelf life for a Phase I ESA runs from the earliest completed critical task, not the report date, and the assessment expires after one year regardless of updates. If a deal timeline slips, interviews, lien searches, regulatory records, and the site visit often must be refreshed, along with the environmental professional’s certification. Failure to meet these requirements can jeopardize liability defenses.

ASTM E1527-21 also requires environmental professionals to document significant data gaps, expand historical research for both the subject and adjoining parcels, and clearly distinguish among Recognized Environmental Conditions (RECs), Historical RECs, and Controlled RECs. Buyers should require site mapping and photo documentation tied to RECs. This documentation supports price adjustments, lender reliance, and enforceable post-closing obligations.

To qualify for the Bona Fide Prospective Purchaser defense under CERCLA, buyers must go beyond a compliant Phase I ESA. They must exercise appropriate care after closing, comply with institutional controls and land-use restrictions, cooperate with response actions, and avoid affiliations with liable parties that could defeat the defense. Counsel should translate these continuing obligations into operational playbooks, access agreements, and funding mechanisms, ensuring that defense eligibility is maintained throughout ownership, not just at closing.

PFAS, Regulatory Uncertainty, and Closure

The regulatory landscape for PFAS has shifted significantly. In July 2024, EPA designated PFOA and PFOS as hazardous substances under CERCLA. This triggers immediate reporting obligations for releases at or above one pound in a 24-hour period and allows the government to pursue cost recovery for response actions. EPA has indicated it will exercise enforcement discretion, focusing on manufacturers and industrial contributors rather than municipal utilities. However, this policy is not a liability waiver and could change.

For deal teams, these changes have immediate and practical implications. Phase I ESAs must now evaluate PFOA and PFOS as in-scope hazardous substances to comply with AAI. Many transactions will require PFAS screening as part of Phase II sampling, especially where known pathways exist, such as firefighting foam at manufacturing facilities or airports, plating and etching lines, paper and textile operations, or landfills and leachate. Counsel should anticipate both reporting and remediation obligations and ensure these are reflected in deal pricing. However, EPA appears to be continuing to reevaluate some aspects of the 2024 listing, creating uncertainty. Buyers can often address contingent risk from broader PFAS designations or stricter cleanup criteria by expanding the scope of defined terms and representations and warranties, or by including targeted reopener provisions or conditional escrows.

PFAS issues also complicate waste permitting. Guidance for destruction and disposal is evolving, analytical methods are expanding, and Clean Water Act programs are beginning to incorporate PFAS monitoring and limits. Consultants should map regulatory touchpoints across air, water, waste, and product stewardship to ensure buyers understand the full lifecycle obligations for both legacy releases and ongoing operations.

Translating Consultant Findings into Deal Language

Negotiating a win-win transaction requires converting environmental findings into agreed economics, controls, and decision rights. This process often begins with credible cost modeling. Consultants can provide order-of-magnitude estimates for investigation, interim measures, and likely remedies, accounting for the possibility of future regulatory tightening. For example, chlorinated solvent plumes that create vapor intrusion risks may require both immediate mitigation and long-term monitoring, while soils with polychlorinated biphenyls (PCB) or metals under pavement may be managed with caps and institutional controls.

Contract documents must be crafted to perform under real-world conditions. Sellers will often seek to limit indemnities to known conditions and include survival periods, caps, baskets, and exclusive remedy clauses that reflect the likelihood and scale of claims. Access and cooperation covenants should specify sampling rights, chain-of-custody, split-sample protocols, and designate the owner or operator of record for response actions to avoid CERCLA operator exposure. Where risk-based closures are anticipated, contracts should provide a clear reference to the documentation of institutional control obligations, engineering control operation and maintenance plans, and any five-year review commitments.

Price adjustment mechanisms can bridge valuation gaps when data is incomplete. Closing price reductions may be paired with contingent value rights or earn-outs tied to regulatory milestones, aligning incentives to expedite cleanup. In distressed or carve-out transactions, seller financing combined with environmental reserves can enable deals to close that might otherwise stall due to remediation cost uncertainty.

Layered Risk Transfer

No single tool eliminates environmental risk. Often, a layered approach should be used to address different exposures.

Indemnities and escrows are often foundational. Escrow releases should be tied to objective milestones, such as regulator-approved work plans, completion reports, or issuance of no-further-action determinations. Where regulatory uncertainty is high, parties can set aside conditional tranches to address future standards with sunset dates that reflect realistic agency timelines.

Environmental insurance can be a valuable supplement when structured appropriately in rare cases. At least theoretically, pollution legal liability policies can backstop unknown pre-existing conditions and third-party claims, and specifically crafted endorsements may address PFAS where underwriters are willing. Relying solely on representations and warranties insurance may be insufficient for some environmental matters, as representation and warranties insurance often excludes or severely limits pollution coverage. When buyers require budget certainty for a defined remedial program, fixed-price remediation contracts — sometimes paired with financial assurance — can be effective, though legacy insurance purporting to cap future environmental costs remains difficult to secure in practice.

State voluntary cleanup and brownfield programs can provide durable value. Counsel can guide sites through these programs to obtain covenants not to sue, no-further-remediation letters, or liability assurances. While these assurances are not binding on the federal government, they carry significant weight with lenders and future buyers and often serve as the basis for institutional controls. Where CERCLA risk is significant, prospective purchaser agreements or comfort letters with EPA or state agencies can align expectations for response actions and facilitate redevelopment.

Common Transactional Risk-Allocation Tools

PFAS coverage remains evolving, and manuscript terms matter. IC/EC refers to institutional and engineering controls.

Regulator Strategy as Deal Strategy

Engagement with regulators should be considered as part of a proactive element of deal strategy, not an afterthought. Buyers and sellers can jointly approach agencies with a concise site history, a conceptual site model, and a proposed path to closure. However, such an approach rarely aligns with the transaction timeline. Where data gaps are material, pre-signing access agreements can enable targeted Phase II work, reducing the risk of post-signing surprises. For properties under administrative orders or subject to five-year reviews, counsel should analyze reopener provisions and, in consultation with regulators, assess whether selected remedies remain protective in light of new contaminants or updated guidance.

The evolving PFAS regulatory landscape makes alignment with regulators even more critical. The designation of PFOA and PFOS under CERCLA triggers release reporting and potential response obligations. Parties should agree on a coordinated reporting strategy before signing and ensure that disclosures are accurate. While EPA’s current enforcement discretion focuses on parties whose past practices were believed to have significantly affected the environment, this is not a liability waiver in perpetuity and may change. Proactive engagement can help shape reasonable, phased responses and reduce the risk of unexpected regulatory directives.

Post-Closing Implementation

Execution after closing is often underestimated, but it is critical to preserving value and managing risk. Buyers should implement environmental management systems that track institutional controls, maintain engineering controls, and conduct periodic audits. Access rights must be operationalized with clear notice procedures, safety protocols, and community messaging to avoid conflicts during site work. Vapor intrusion mitigation systems require ongoing service plans and tenant communication. Meticulous recordkeeping is essential, as it supports eligibility for liability defenses and satisfies insurer requirements.

Integration teams must also focus on permits, waste streams, and product lines. Permit transfers and modifications can be complicated by PFAS or other emerging contaminants as National Pollutant Discharge Elimination Systems and pretreatment programs become more stringent. Waste characterization protocols may need updating to reflect new analytical methods. Counsel and consultants should identify these pinch points and recommend corrective actions to avoid enforcement or citizen suits.

Vapor Intrusion, TSCA-PCBs, and State-Level Traps

Vapor intrusion is often a critical issue in industrial portfolios. Chlorinated solvents and petroleum hydrocarbons can create indoor air risks that require mitigation, regardless of soil or groundwater remedies. Sampling plans should account for seasonal variability and ensure that any required mitigation is integrated into operations and lease structures. For multi-tenant assets, standardized lease language and access provisions are necessary to monitor and maintain sub-slab depressurization systems.

PCBs regulated under the Toxic Substances Control Act (TSCA) can complicate due diligence and site closure. PCB bulk product and remediation waste are subject to strict cleanup and disposal requirements, and self-implementing cleanups must adhere to federal thresholds and approvals. Buyers should not assume that risk-based closures under state programs will satisfy TSCA; a TSCA-specific analysis may be essential where legacy electrical equipment, old building materials, or historical spills are present.

State regimes can shape deal contours in ways that federal law does not. For example, New Jersey’s Industrial Site Recovery Act imposes transaction-triggered remediation and certification obligations. Other programs, such as Ohio’s Voluntary Action Program or Illinois’ No Further Remediation letters, offer attractive liability assurances but include ongoing obligations that must be costed and managed. Consultants and counsel should tailor diligence and documentation to the cadence and requirements of the relevant state program, ensuring that regulator expectations — not just federal defenses — are satisfied.

Conclusion

Environmental risk in industrial property transfers must be understood and managed through layered strategies such as targeted indemnities, well-funded escrows, site-specific environmental insurance, and regulatory instruments that provide durable liability assurance. Early, purposeful engagement with regulators and disciplined post-closing execution of continuing obligations can also protect both the transaction and the future owner’s defenses.

Even with these steps, from the perspective of a property buyer, residual uncertainty is unavoidable. Agencies may change standards, remedies can underperform, and new contaminants may emerge. The most successful transactions balance the need for future investment in industrial assets with clear, funded, and enforceable cleanup responsibilities allocated between parties that protect health and the environment.