The United States Environmental Protection Agency (EPA) recently
announced that it will exercise its discretion to treat tenants as
"bona fide prospective purchasers" (BFPP) under CERCLA
(the federal Superfund law) if the tenants meet certain
requirements. This guidance is good news for tenants who lease
contaminated property.
CERCLA generally imposes strict liability for cleanup costs on
"owners" or "operators" of contaminated sites.
"Owners" and "operators" can sometimes include
tenants if they exercise sufficient control over the site or over
the contamination. However, CERCLA provides liability protection to
parties who can demonstrate that they are BFPPs. In general, the
BFPP defense is available to a party who acquires ownership of a
property after January 11, 2002 and establishes the following:
- All disposal of hazardous substances at the property occurred prior to acquisition;
- The party conducted all appropriate inquiry (AAI) into the previous ownership and uses of the facility;
- The party provides legally required notices;
- The party takes reasonable steps with respect to hazardous substance releases;
- The party provides cooperation assistance and access;
- The party complies with land use restrictions and institutional controls;
- The party complies with information requests and administered subpoenas; and
- The party is not potentially liable for response costs at the facility or "affiliated" with any such person.
Tenants can generally piggyback on the BFPP status of the
property owner, provided that the tenant does not impede the
performance of any remediation activities. As long as the owner
maintains compliance with the BFPP criteria, the tenant who has
derived BFPP status does not have any independent duty to carry out
those responsibilities.
The EPA's new guidance clarifies two points about BFPP
protection for tenants. First, a tenant can keep its BFPP
status even if the owner loses its BFPP protection by
failing to comply with its continuing obligations. EPA's
position is helpful for tenants, as a tenant need not rely on an
owner to keep up with the continuing BFPP obligations. However, in
order to maintain BFPP status in these circumstances, a tenant must
comply with the same requirements applicable to owners, except that
a tenant need not conduct AAI.
Second, the EPA's guidance explains that a tenant
may enjoy BFPP status even if
the owner never qualified as a BFPP. In order to
qualify as a BFPP in these circumstances, a tenant must comply with
all of the general BFPP requirements applicable to owners,
including conducting AAI before entering the lease. This
guidance is not binding; the EPA retains enforcement discretion to
deal with individual cases on a site-specific basis.
In light of the EPA's guidance, tenants should also carefully
consider their due diligence strategy before leasing properties
that may be contaminated. Proper due diligence may allow tenants to
take advantage of the BFPP protection, regardless of the
owner's BFPP status.
Please contact any member of the Environment & Energy
Strategies Group at Godfrey & Kahn if you have any further
questions on the manner in which tenants can develop strategies to
avoid cleanup liability at properties they are considering to
lease.
EPA's guidance can be found here: http://www.epa.gov/enforcement/cleanup/documents/policies/superfund/tenants-bfpp-2012.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.