Prudence suggests that most real estate transactions (especially commercial and industrial) be assessed for environmental impairment prior to consummation of a property transfer, to evaluate the risk of the transfer in light of potential environmental liabilities.

Environmental liability, exposing past and present property owners to substantial expenses for the cleanup of hazardous materials from real property, was established under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA).

CERCLA was amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA). SARA recognized the fact that a landowner who had no connection with the release of hazardous substances at a property would still be liable under CERCLA and provided the "innocent landowner defense". Most lending institutions have established a policy requiring the performance of an "all appropriate inquiry" known as a Phase I Environmental Site Assessment (ESA), to establish the SARA innocent landowner defense requirement.