On December 5, 2012, USEPA issued revised guidance under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) that expands protections for tenants that might otherwise be held liable for cleanup and remediation costs at leased properties. This guidance replaces USEPA’s prior 2009 guidance.

When Congress amended CERCLA with the Superfund Amendments and Reauthorization Act (SARA), it attempted to alleviate the “brownfields” problem resulting from CERCLA’s strict liability scheme by including a provision to protect “bona fide prospective purchaser(s)” (BFPPs) that acquired ownership of contaminated property after January 11, 2002. A BFPP is defined as a “person (or tenant of a person)” that meets certain pre- and post-closing requirements. The BFPP criteria are met if the person: (1) does not dispose of hazardous substances on the property; (2) conducts “all appropriate inquiry” into prior ownership and uses of the property; (3) makes all legally required notices; (4) takes responsible steps regarding releases; (5) cooperates; (6) complies with institutional controls and land use restrictions; (7) complies with administrative subpoenas and information requests; and (8) is not potentially liable for response costs or affiliated with a person who is liable for response costs at the facility. The statutory language provides only derivative BFPP protection to tenants, which means that tenants are only protected so long as the owners maintain their BFPP status. In most cases, the continued BFPP status of the owner is out of the tenant’s control, leaving the tenant vulnerable to future enforcement.

USEPA attempted to rectify this unfair result with its 2009 guidance, which established a policy of non-enforcement against: (1) tenants with sufficient “indicia of ownership” to be treated as owners; and (2) tenants of BFPP owners that subsequently lost their BFPP status. Under this guidance, tenants with sufficient “indicia of ownership” were protected from enforcement so long as the tenants independently satisfied all of the BFPP requirements, including AAI. A tenant without indicia of ownership could also remain protected from enforcement by meeting all the BFPP requirements except AAI, but only if the owner was a BFPP that subsequently lost BFPP status. The 2009 guidance provided no protection for tenants without indicia of ownership whose owners never qualified as BFPPs.

USEPA’s new 2012 guidance attempts to close this gap by eliminating the distinction between tenants with sufficient “indicia of ownership” and those without. Under the new guidance, USEPA may treat any tenant with a non-BFPP owner as a BFPP if the tenant independently satisfies all the BFPP requirements, including conducting AAI. This policy applies regardless of whether the tenant has sufficient “indicia of ownership.” USEPA is maintaining its policy for tenants whose owners lose BFPP status through no fault of the tenant, and continues to treat these tenants as BFPPs if the tenant satisfies all of the BFPP requirements except AAI. USEPA has also clarified that it will not treat the lease agreement as creating a prohibited “affiliation” between the tenant and a liable party. So long as the tenant satisfies the appropriate BFPP requirements, USEPA’s policy of non-enforcement will apply.

USEPA’s new guidance allows prospective tenants to take action to protect themselves from potential enforcement, rather than relying on the owner to maintain BFPP status. Although this is a positive development for prospective tenants with regard to USEPA enforcement, this is a policy only and does not provide a statutory defense to tenants whose owners do not currently have BFPP status. USEPA may still choose to enforce against a tenant if it determines that enforcement is warranted in a particular case, and this policy does not protect tenants from private parties or states that share joint and several liability. Additional state requirements for BFPP status may also apply that are not addressed by this guidance. Thus, although USEPA’s new guidance lessens the enforcement risk for tenants, it does not remove risk entirely. For this reason, due diligence on the part of the tenant continues to be of paramount importance prior to entering any lease agreement.