CERCLA Affords BFPP Protections To Certain Tenants

11 Jan 2013

New CERCLA guidance from the EPA confirms that some tenants who lease contaminated or formerly contaminated properties may find safety from liability under CERCLA’s self-implementing bona fide prospective purchaser (“BFPP”) liability protections and conversely, some may not.

CERCLA’s BFPP defense allows a qualified purchaser to conduct the all appropriate inquiry (“AAI”) and to purchaser property with knowledge of hazardous substance contamination without incurring liability as an owner or operator.  CERCLA defines a BFPP as “a person (or tenant of a person) that acquires ownership of a facility after [January 11, 2002]” who establishes a number of factors including that disposal of hazardous substances at the facility occurred prior to acquisition and the person conducted AAI into the previous ownership and uses of the facility.

Per the EPA, a tenant may derive BFPP status from its landlord who satisfies the BFPP criteria.  The tenant remains a BFPP and retains its protection from CERCLA liability as long as the landlord maintains its BFPP status, all disposal of hazardous substances at the facility occurred before acquisition, and the tenant does not impede a response action or natural resource restoration. 

According to the guidance, if the owner loses its BFPP status, the tenant generally would no longer have derivative BFPP status.  However, if a tenant has derivative BFPP status through the owner and the owner loses its status, through no fault of the tenant, the EPA notes that it may exercise its enforcement discretion to treat the tenant as a BFPP if the tenant itself meets the BFPP provisions with the exception of the AAI provision which would have already been conducted by the owner.  This last point is important as it means that some tenants may not need to do their own environmental due diligence, although doing so is the safer route (and may be required for protection in Michigan).

Where the owner is not and was not a FBPP, the EPA intends to exercise its enforcement discretion on a site-specific basis to treat a tenant as a FBPP when the tenant itself meets all of the BFPP requirements and the tenant’s lease agreement was executed after January 11, 2002.   

It is important to note that EPA may decline to exercise its enforcement discretion under various circumstances (e.g., the lease is designed to allow the landlord or tenant to avoid its CERCLA liability).  In addition, tenants relying on derivative BFPP status need to be careful and may want to independently determine whether the owner is meeting the BFPP requirements.  Otherwise, they may find themselves without protection.  Michigan has its own Baseline Environmental Assessment program, but MDEQ often looks to EPA guidance in determining how to proceed.

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