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Apr 2013
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April 30, 2013

EPA Clarifies Liability of Tenants Under Superfund Law


The United States EPA has issued a guidance memorandum giving tenants a new opportunity to protect themselves from Superfund liability. Captioned as "Enforcement Guidance," the memo reflects the position of the EPA administrative staff in evaluating a tenant's liability for contamination at a leased property. Even though the guidance memorandum has no binding legal effect, it provides a significant clarification of the EPA's interpretation of the Superfund law.

In 2002, Congress passed the Brownfield Amendments to Superfund, which established new liability protections for a "bona fide prospective purchaser" (BFPP) of contaminated property. A BFPP is not liable to clean up pre-existing contamination. To qualify as a BFPP, (A) all disposal of hazardous substances must have occurred before the person acquired the facility; (B) the person must have conducted "all appropriate inquiries" prior to acquiring the property; and (C) the person must satisfy continuing obligations that include required notices, appropriate care, cooperation, assistance and other matters.

As originally enacted, BFPP status was limited to qualifying purchasers and their tenants.  Thus, a tenant’s ability to enjoy the benefits of BFPP status was contingent upon the landlord’s continuing compliance with BFPP requirements. If the landlord ceased to qualify as a BFPP, the tenant’s derivative BFPP status was likewise terminated. (The EPA has previously stated that favorable consideration can be given to tenants whose derivative BFPP status is lost through no fault of their own.)

The new EPA guidance addresses the situation of a tenant whose landlord is not a BFPP – in which case there can be no derivative BFPP status for the tenant. Under the new guidance, the EPA will treat a tenant just like a purchaser, regardless of the landlord's qualification for the defense and subject to the tenant’s meeting the conditions for qualification as a BFPP. This represents a significant opportunity for prospective tenants. It also means a tenant of any non-residential property must undertake "all appropriate inquiry" and comply with the continuing obligations specified in the statute.

The new EPA guidance is limited to federal law. Under Michigan’s primary cleanup law, a lessee who uses property for retail, office or commercial purposes is not liable for pre-existing contamination caused by others. A lessee of industrial property can avoid cleanup liability only by conducting the same level of due diligence as a purchaser and attaining "innocent purchaser" status or performing a Baseline Environmental Assessment.

If you have questions about BFPP status or buying or leasing contaminated property, please contact Warner’s Environmental Law Practice Goup Chair Scott D. Hubbard (shubbard@wnj.com or 616.752.2157).

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