In early December 2012, US EPA issued a revised guidance that expands the bona fide prospective purchaser (“BFPP”) defense for tenants. Specifically, the revised guidance states that EPA will exercise its enforcement discretion on a site-specific basis to apply the defense to all tenants who are otherwise independently fulfilling the statutory BFPP requirements.
That means that a tenant would not be statutorily liable under CERCLA for known environmental contamination if: (1) before the execution of the lease, the tenants conducted all appropriate inquiries (“AAI”) that reveal the environmental contamination, and (2) after the execution of the lease, the tenants comply with other BFPP defense criteria, including taking all necessary reasonable steps to address certain contamination, not causing any release, complying with agency information requests, and not impeding with any ongoing response action.
Under a prior 2009 guidance, EPA strictly applied the statutory BFPP definition and recognized the BFPP defense for two types of tenants:
1. Tenants with indicia of ownership—Tenant whose leases give sufficient indicia of ownership are qualified as a BFPP. Factors supporting a finding of ownership includes the length of the leases, range of permitted uses, extent to which the tenants need permission from owners for certain actions, the owners’ reserved property rights, and responsibility for taxes, insurance, and repairs.
2. Tenants of owners who are BFPPs— Tenants who lease from owners who satisfy the BFPP criteria may qualify as BFPPs. Those tenants remain BFPPs for as long as owners maintain compliance with the criteria, and tenants do not have an independent duty to implement BFPP responsibilities, including AAI.
The 2012 guidance expanded the interpretation of the BFPP defense by imposing independent obligations on the tenants, thereby giving them more control over their own fate. Thus, anyone looking to lease industrial properties, or commercial properties that may have had industrial uses, should consider at least conducting a Phase I environmental site assessment, rather than relying on what the owners did.