Reprinted with Permission from Author: Claire Juliana of Aon Risk Solutions
Earlier
this year, the United States Environmental Protection Agency (“EPA”) issued
revised enforcement guidance for the treatment of tenants under the Bona Fide
Prospective Purchaser (“BFPP”) provision of the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA). (See: http://www.epa.gov/enforcement/cleanup/documents/policies/superfund/tenants-bfpp-2012.pdf). This
guidance supersedes the EPA’s previous January 2009 guidance and is intended to
address remaining uncertainty regarding the potential liability of tenants
under CERCLA and the applicability of the BFPP provision given that the
provision makes explicit reference to tenants in § 101 (40). Under previous
guidance, the BFPP protection was only available if the tenant’s landlord
itself qualified and maintained its status as a BFPP or if the tenant’s
leasehold right was the equivalent of an owner. The new guidance provides the
EPA with expanded enforcement discretion to a tenant of a contaminated site
whose owner loses BFPP status or a tenant that itself meets the necessary BFPP
criteria as applied to a tenant. This summary is intended to provide details of
the new policy.
Under
Section 107(a)(1) of CERCLA, “the owner and operator of a … facility….from
which there is a release, or a threatened release which causes the incurrence
of response costs, of a hazardous substance, shall be liable for …(A) all costs
of removal or remedial action incurred by the United States Government….” So,
absent liability protection, an owner or operator of a contaminated property is
a potentially liable party under CERCLA. Section 107 (r)(1) is the provision of
CERCLA that articulates the statutory liability protection for BFPPs as
follows:
Notwithstanding
subsection (a)(1) of this section, a bona fide prospective purchaser whose
potential liability for a release or threatened release is based solely on the
purchaser’s being considered to be an owner or operator of a facility shall not
be liable as long as the bona fide prospective purchaser does not impede the
performance of a response action or natural resource restoration.
In
general, a BFPP is "a person (or a tenant of a person)" that acquires
ownership of a facility after January 11, 2002, and satisfies the following
criteria:
·
Conducts "all appropriate inquiries" into the previous
ownership and uses of the property.
·
No disposal of hazardous substances at the facility on or after
acquisition.
·
Provides all legally required notices.
·
Takes reasonable steps with respect to any hazardous substance
releases.
·
Provides cooperation, assistance and access to those conducting
response actions.
·
Complies with land use restrictions and institutional controls.
·
Complies with information requests and administrative subpoenas.
·
Is not potentially liable for response costs at the facility or
has no affiliation with a responsible party (i.e., other than an affiliation
created by the instruments by which title to the facility is conveyed or
financed or by a contract for the sale of goods or services).
Under
the new guidance and on a site specific basis the EPA has the enforcement
discretion:
1.
To treat a tenant who derives BFPP status from its
owner/landlord as a BFPP even if the owner/landlord has lost its BFPP status
(through no fault of the tenant) as long as the tenant meets all of the BFPP
provisions, except the all appropriate inquiries provision. That said, the EPA
notes that a tenant may still wish to obtain information on prior uses of the
facility in order to have an informed basis upon which to perform the other
requirements of the BFPP provision. With respect to the “no affiliation” provision,
although a lease “is [not] created by the instruments by which title to the
facility is conveyed or financed or by a contract for the sale of goods or
services” per §101(40)(H)(i)(II), the EPA has the discretion to treat a lease
between the tenant and owner an as acceptable affiliation.
2.
To treat a tenant as a BFPP as long as the tenant satisfies all
of the BFPP criteria including conducting all appropriate inquiries.
The new
guidance addresses a gap in the CERCLA liability protections and allows tenants
to follow the same steps as purchasers in order to establish the protection as
a BFPP. Many tenants of commercial and industrial properties already routinely
perform Phase I environmental assessments as part of their due diligence
practices so to the extent that this satisfies the all appropriate inquiries
requirement and the other criteria are met, the tenant has some measure of
comfort that the EPA is not likely to hold the tenant liable for pre lease
contamination. The guidance itself, however, cautions that the EPA has
enforcement discretion so where a lease is, for example, designed to allow the
landlord or tenant to avoid CERCLA liability, the EPA would likely decline to
exercise its enforcement discretion. As always, tenants should consult with
experienced advisors in ascertaining what steps should be undertaken to help
protect against CERCLA liability.
Copyright © Aon plc 2013. This Alert is for general informational
purposes only and is not intended to provide individualized business or legal
advice. The information contained in this Alert was compiled from sources
that Aon considers to be reliable; however, Aon does not warrant the accuracy
or completeness of any information herein. Should you have any questions
regarding how the subject matter of this Alert may impact you, please contact
your Aon team member or other appropriate advisor
Aon plc (NYSE: AON) is the
leading global provider of risk management, insurance and reinsurance
brokerage, and human resources solutions and outsourcing services. Through its
more than 61,000 colleagues worldwide, Aon unites to empower results for
clients in over 120 countries via innovative and effective risk and people
solutions and through industry-leading global resources and technical
expertise. Aon has been named repeatedly as the world's best broker, best
insurance intermediary, reinsurance intermediary, captives manager and best
employee benefits consulting firm by multiple industry sources. M. Claire Juliana J.D. is the Director of Environmental Claims
at Aon Risk Solutions. Visit www.aon.com for
more information.
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