EPA Announces New Tenant Protections Under Superfund

Posted By on April 30, 2013

EPA has just extended to tenants the Bona Fide Prospective Purchaser (“BFPP”) protection, by which Congress previously exempted certain prospective owners from harsh Superfund liability. Even where the landlord loses its BFPP protection, the new EPA enforcement guidance memo allows tenants to hold onto it, assuming the tenant can meet certain requirements.

Traditionally, a tenant derived its BFPP status from the landowner who complied with each of the eight criteria set out in Section 101(40)(A)-(H) of the Superfund law. Principal among these requirements is conducting “All Appropriate Inquiries” before purchasing the property, usually through commissioning a Phase I Environmental Site Assessment. There are also continuing obligations after purchase, such as not spreading the contamination around by development activities, and providing EPA with access to the property. Simple enough, except for the cases where landowners failed or refused to comply with their ongoing obligations and lost their BFPP status.

So what happens to a tenant when a landowner loses its BFPP status?

Prior to EPA’s new enforcement guidance memo, it was an open question, fraught with potential liability for the tenant. But under the new EPA guidance, a tenant can actually establish its own independent BFPP status if it complies with those same eight criteria set out in Section 101(40)(A)-(H). The only difference is that rather than conducting “All Appropriate Inquiries” prior to the purchase of the property, the tenant must conduct AAI prior to signing its lease.

With the Gowanus Canal and Newtown Creek Superfund sites cutting through the heart of industrial Brooklyn and Queens, parties looking to rent space in these areas would do well to take notice of EPA’s new enforcement guidance, and plan accordingly. By laying the proper groundwork with AAI and minding the continuing obligations, tenants can now obtain the peace of mind provided by BFPP status, without worrying about their landowner’s ability to retain its status as a BFPP.

Of course, EPA’s enforcement guidance does not have the force of law, and is applied by EPA on a site-specific basis. Potential tenants on contaminated properties should be sure to consult with an environmental attorney before signing any lease to ensure that any issues presented by the unique characteristics of an individual site or set of proposed operations will not present problems in meeting EPA’s BFPP requirements for tenants.

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