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| 1 minute read

Designation of two PFAS compounds as hazardous substances could complicate real estate transactions

As recently highlighted by Reed Smith's Environmental Health & Safety team, on April 19, 2024, the Environmental Protection Agency (EPA) announced a final rule adding perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS) to the list of hazardous substances regulated under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as the “Superfund” statute.  The regulation of PFOA and PFOS is expected to add complications to real estate transactions, including issues such as reporting requirements, the allocation of responsibility for PFAS contamination, and insurance policy exclusions.  

Prior to the EPA's recent designation of PFOA and PFOS as hazardous substances, Phase I investigations on properties did not need to address the presence of PFOA and PFOS.  Consultants will now need to report on the presence or potential presence of the two PFAS compounds, which may lead to Phase II sampling being recommended more frequently.  If a subsequent subsurface investigation reveals the presence of PFOA or PFOS, reporting requirements may be triggered, and possibly remediation, under CERCLA.  Both parties in a real estate transaction will need to consider this issue and the allocation of responsibility for contamination, and buyers will want to ensure that they abide by all of the requirements necessary to preserve defenses under CERCLA in order to mitigate the risks of Superfund litigation.  

Further, insurance policies may exclude PFAS-related liabilities more frequently, and buyers should be aware of an evolving exclusion standard.  Being aware of - and, more importantly, having the understanding of how to address - the potential new complications in real estate transactions posed by the designation of PFOA and PFAS as hazardous substances will be critical to ensuring the success of real estate transactions moving forward. 


If a REC related to PFOA or PFOS contamination is identified in the Phase I, a subsurface investigation will likely be recommended as a next step in order to determine whether PFOA or PFOS is present onsite in excess of regulatory action levels. If PFOA or PFOS is found in that investigation, it could trigger reporting requirements, and possibly remediation, under CERCLA. Buyers and sellers of real estate therefore need to be aware that this issue will now arise more often in Phase I reports, complicating their transactions.


real estate, hazardous substances