Tenants Can Now Obtain Protection from CERCLA Liability

Environmental Law


The United States Environmental Protection Agency (“USEPA”) created new guidance relieving tenants who lease currently or formerly contaminated property of certain liabilities as long as they satisfy specified requirements. The December 5, 2012 Guidance Document titled “Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision” adds to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) liability protection under Section 107(r) for parties that qualify as bona fide prospective purchasers (“BFPP”).

Under the guidance, a tenant can itself qualify as a BFPP or piggy-back on the BFPP status of the property owner. If the property owner loses BFPP status, at no fault of the tenant, the tenant may be able to maintain its BFPP status as long as it meets the following criteria:

     1. All disposal of hazardous substances at the facility occurred prior to execution of the lease;

     2. The tenant conducted All Appropriate Inquiry (“AAI”) prior to execution of the lease;

     3. The tenant provides legally required notices;

     4. The tenant takes reasonable steps with respect to hazardous substance releases;

     5. The tenant provides cooperation, assistance, and access;

     6. The tenant complies with land use restrictions and institutional controls;

     7. The tenant complies with information request and administrative subpoenas;

     8. The tenant is not potentially liable for response costs at the facility or “affiliated” with any such person (other than through the lease with the owner); and

     9. The tenant does not impede any response action or natural resource restoration.      

Although this guidance is not law, it is intended to assist USEPA personnel in exercising the Agency’s enforcement discretion. The USEPA intends to apply this guidance on a site-specific basis only to the extent appropriate based on the facts regarding the property, however it “is not a rule and it does not create new liabilities or limit or expand obligations under any federal, state, tribal, or local law. It is not intended to and does not create any substantive or procedural rights for any person at law or in equity.”[1]

Under section IV of the guidance, the EPA generally will not be involved with facility-specific transactions or determinations of BFPP status. As a general rule, tenants should be wary of environmental conditions at a property prior to entering into a lease, but should take some comfort in this USEPA guidance as long as the tenant meets the criteria for BFPP status.

For more information on CERCLA liability protections for tenants and BFPP status requirements, please contact Miriam Villani or Jason Kaplan.

[1] USEPA, Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision, at 2.

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