Prospective Purchaser Agreements

​The Oregon Department of Environmental Quality uses Prospective Purchaser Agreements to facilitate cleanup and productive reuse of properties contaminated with hazardous substances.

Investment in properties with existing contamination can be uncertain due to the strict liability scheme under state and federal laws. PPAs benefit buyers by limiting their liability, and benefit the state and local jurisdiction by promoting environmental cleanup, returning properties to productive use, and allowing purchasers to provide substantial public benefits.

A prospective purchaser can be an individual, business, government body or any other entity with the interest and ability to purchase or lease contaminated property, where the prospective purchaser has neither caused nor aggravated contamination.

If you’re thinking about buying property that you know or suspect to be contaminated with hazardous substances, you may be interested in a Prospective Purchaser Agreement. The agreement’s liability protections clarify and limit your responsibility to the state of Oregon for the existing contamination. PPAs often make it easier to obtain financing for property purchase. Because it “runs with the land,” a PPA can also protect subsequent owners and lessees, as long as they adhere to the PPA’s terms.

No. PPAs must be negotiated and finalized before the property is purchased.

No. Every property presents a unique set of circumstances and not all properties are appropriate for PPAs. As a starting point, the minimum requirements in the law are:

• The prospective purchaser isn’t responsible for cleaning up existing contamination at the property;
• There is contamination at the property and the law requires it to be cleaned up;
• The prospective purchaser’s proposed use for the property will not worsen contamination or interfere with necessary cleanup; and
• A substantial public benefit will result from the agreement.

The law provides the framework for DEQ’s evaluations by listing examples of substantial public benefit, including:

• Generation of substantial funding or other resources for environmental cleanup at the property.
• Commitment to perform substantial environmental cleanup at the property.
• Productive reuse of an abandoned or vacant industrial or commercial facility.
• Development of the property by a governmental entity or non-profit to address an important public purpose.

These are typical substantial public benefits for PPAs that DEQ has negotiated. However, DEQ evaluates each agreement individually, and there’s a wide range of potential substantial public benefits. DEQ encourages prospective purchasers to be creative.

• Begin the process by contacting DEQ’s Prospective Purchaser Program coordinator to obtain the program packet and schedule an initial meeting.
• During the initial meeting, DEQ staff will ask questions to determine whether a PPA is appropriate for this property.
• If you and DEQ decide to move forward, you must submit an application though Your DEQ Online and pay a $2,500 deposit. The deposit is required for DEQ to start working on the PPA; it does not ensure that a final agreement will be reached. Submitting a PPA requires a Your DEQ Online account. For detailed instructions on how to complete this submittal please reference the Your DEQ Online User Guide​.
• You then begin negotiations, share technical information about property contamination, and strive to reach an agreement that meets the needs of both you and the state. If, as part of the PPA, you agree to conduct cleanup actions at the property, you will do so through DEQ’s cleanup program.
• When the PPA is completed, or negotiations cease, any balance remaining from the deposit is refunded.

Average time to complete a PPA is four to six months. The length of time depends on: 1) how much DEQ knows about contamination at the property; 2) whether DEQ needs to modify the standard PPA language to accommodate unique circumstances; and 3) the number of PPAs that DEQ staff is currently working on.

You have an obligation to properly record the PPA and related documents in the appropriate county office, and must meet all PPA conditions. Failure to do either of these may void the agreement and the liability protections it provides.

Please call DEQ's PPA program coordinator at 503-229-6461 (800-452-4011 x6461, toll-free in Oregon) if you have questions about the program or want to discuss whether a PPA may be appropriate and useful for your transaction.

​Known or potential contamination may add cost and uncertainty to real estate transactions. Therefore, it is natural for buyers of contaminated properties in Oregon to be concerned about their potential liability for costs associated with investigating and cleaning up that contamination. For those acquiring such properties, this fact sheet briefly describes potential liability under Oregon’s environmental cleanup law and under the federal cleanup law, Comprehensive Environmental Response, Compensation and Liability Act, and some methods to manage that liability.

NOTE: This information is not intended and should not be construed as legal advice. Prospective purchasers should consult with an attorney before buying potentially contaminated property.

Under Oregon Revised Statute 465.255, a buyer of contaminated property may become liable for the cost of cleaning up existing contamination, if the buyer knew or should have known about the contamination at the time of purchase. When a pre-acquisition environmental assessment reveals contamination, the purchaser may become liable for that contamination - even though it occurred before the purchaser became the owner. Similarly, a person buying property without first conducting an environmental assessment may become liable for existing contamination that is discovered later.

ORS 465.255 includes some statutory defenses that are particularly relevant to buyers. For example, under the “innocent purchaser” defense, a person who buys property that is already contaminated would not be liable if the person did not know and reasonably should not have known of the contamination at the time of purchase. To maintain this defense, the person must have conducted “all appropriate inquiry” before purchasing the property. Although Oregon has not adopted an AAI rule, an assessment consistent with the federal AAI rule (discussed below) would generally constitute satisfactory inquiry. Other forms of inquiry may also be sufficient. In any case, if the pre-acquisition assessment identifies contamination or conditions requiring further inquiry, this defense would not be available.

Persons who inherit contaminated property and entities that take contaminated property by condemnation or tax foreclosure may also have defenses to liability under Oregon law. Oregon law also provides a “security interest holder” defense to liability, which may protect lenders and others who hold mortgages or trust deeds on contaminated property simply to secure payment.

Other state tools available to prospective buyers to manage potential liability include Prospective Purchaser Agreements and No Further Action decisions.

The Oregon Legislature created the Prospective Purchaser program to encourage redevelopment of contaminated properties. DEQ may enter into a PPA with a prospective buyer that limits the purchaser’s liability for environmental cleanup at the property if the agreement will result in a “substantial public benefit” (e.g., substantial funding toward cleanup, cleanup actions, or productive reuse of vacant property). PPAs can often help buyers and sellers decide who will pay for and complete cleanup of the property. To provide liability protection, a PPA must be completed before the purchaser closes on the property.

In many cases, concerns about liability can be addressed by the seller cleaning up the property before closing on the sale. Sellers often work though DEQ’s Voluntary Cleanup Program to investigate and clean up contamination before a transaction closes. When cleanup is complete, DEQ will issue a NFA letter. This action does not release a current owner or subsequent purchaser from liability but does indicate that, based on information then available to DEQ, the property has been cleaned up to DEQ’s satisfaction. NFAs may include conditions such as long-term monitoring requirements or land-use restrictions. In either case, for many purchasers, a NFA is a practical approach to address contamination.

In addition, DEQ’s Off-Site Contaminant Migration Policy (which replaces the Contaminated Aquifer Policy) applies to certain properties that have been contaminated solely by releases at other properties.

• Off-Site Contaminant Migration Policy

Note that even if a person qualifies for a defense to liability, a PPA, or relief under DEQ’s Contaminated Aquifer Policy, it does not mean that DEQ or someone else will clean up the property.

Under CERCLA, the owner of contaminated property is liable for cleanup costs, unless that owner qualifies for one or more statutory defenses.

CERCLA provides an “innocent purchaser” defense similar to that in Oregon law, for purchasers who “did not know and had no reason to know” of property contamination at time of purchase. This defense requires the buyer to perform all appropriate inquiry in compliance with U.S. Environmental Protection Agency rules (Code of Federal Regulations, Title 40, Part 312). A detailed property assessment is required to meet the AAI standard.

CERCLA also provides a Bona Fide Prospective Purchaser defense to liability for certain buyers of contaminated property - even when buyers know of the contamination. Purchasers must perform all appropriate inquiry in compliance with the EPA rule and satisfy various “continuing obligations” to maintain the defense.

Unlike a PPA with DEQ, the federal Bona Fide Prospective Purchaser defense does not require a written agreement with EPA. This lack of an agreement, and uncertainty about several provisions in the new BFPP law, has caused concern among some buyers about their potential federal liability. EPA’s BFPP Policy recognizes that, in limited instances, the public interest is served by EPA entering into Prospective Purchaser Agreements or some other form of agreement with purchasers of contaminated property.

Similar to Oregon law, security interest holders, persons who inherit contaminated property and entities taking contaminated property through condemnation may have a defense to liability under CERCLA.

Parties to a real estate transaction can also allocate liability for contamination as between the buyer and seller through indemnification, hold-harmless, or similar agreements. While these can help buyers address uncertainty and are a common feature of many transactions, they do not relieve buyers of any underlying liability.

• A prospective purchaser of property that may be contaminated should make sure the property is investigated before the transaction closes.
• For many purchasers of contaminated property, having an agreement with the seller for cleanup, or ensuring that a DEQ No Further Action decision is in place are practical approaches to managing concerns about contamination and potential liability.
• To manage liability under state law, DEQ offers Prospective Purchaser Agreements.

Special rules not addressed in this fact sheet may apply to properties subject to RCRA (federal Resource Conservation and Recovery Act) or to properties with underground storage tanks.

Please call DEQ's PPA program coordinator at 503-229-6461 (800-452-4011 x6461, toll-free in Oregon) if you have questions about the program or want to discuss whether a PPA may be appropriate and useful for your transaction.