Type: Law Bulletins
Date: 12/20/2012

New EPA Guidance Regarding Tenants As Bona Fide Prospective Purchasers

On December 5, 2012, the U.S. Environmental Protection Agency (“EPA”) released a new guidance document entitled “Revised Enforcement Guidance Regarding Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision” (“2012 BFPP Guidance”).  The 2012 BFPP Guidance is the EPA’s latest version and continues to extend the bona fide prospective purchaser defense (“BFPP”) to tenants who meet the BFPP criteria.   

The BFPP defense came into effect in 2002 as part of the CERCLA Brownfield amendments.1 The BFPP defense allows a prospective purchaser of a known contaminated property to insulate himself from potential CERCLA liability.  Prior to the 2012 BFPP Guidance, the EPA only recognized two ways in which a tenant may become a BFPP:  (1) where the tenant’s lease gives sufficient indicia of ownership to be considered an “owner”; or (2) where a landlord of the tenant was itself a BFPP.  The 2012 BFPP Guidance makes two significant changes.

First, the 2012 BFPP Guidance includes expanded enforcement discretion with regard to the second category – namely, tenants who derive BFPP status from the BFPP status of its landlord.  Specifically, the 2012 BFPP Guidance provides that a tenant can now maintain BFPP status even if the landlord were to lose BFPP status.      

Second, the 2012 BFPP Guidance establishes a third category of tenant eligible for BFPP protection.  The EPA stated that it will “exercise its enforcement discretion on a site-specific basis to treat the tenant as a BFPP when the tenant itself meets all of the BFPP provisions.”  This change essentially allows tenants who executed leases after January 11, 2002, to follow the same steps as purchasers to gain BFPP protection.

While the 2012 BFPP Guidance expands the BFPP protection for tenants, the EPA also provides examples as to when it may not exercise its enforcement discretion.  For example, a tenant may not gain BFPP status if the tenant is a potentially liable party under CERLCA or if the property owner is not in compliance with various state or federal regulations or with administrative or judicial cleanup orders or decrees relating to the leased property.  Although tenants now have the potential to enjoy BFPP protection by meeting the BFPP requirements, many loopholes and obstacles still exist that may preclude a tenant from actually gaining that BFPP protection.

For additional information on the 2012 BFPP Guidance and BFPP protection, contact Frank Deveau, Dave Guevara, or any member of Taft’s Environmental Practice Group.  

1CERCLA stands for the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§ 9601 to 9675, and is also known as Superfund.  The Brownfield amendments were contained in the Small Business Liability Relief and Brownfields Revitalization Act of 2002, Pub L. No. 107-118, 115 stat. 2356.

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