On December 5, 2012, the United States Environmental Protection Agency (EPA) issued revised guidance to memorialize its position that commercial and industrial tenants can protect themselves from contamination liability under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or commonly referred to as Superfund) by relying on an “all appropriate inquiry” of the ownership and uses of the property, timely performed by the landlord, or by timely performing the all appropriate inquiry themselves. EPA’s prior guidance did not indicate these statutory defenses were available to tenants.
1. Why is this guidance significant?
CERCLA imposes strict, joint, and several liability on designated persons, including owners and operators of facilities, where there has been a release or threatened release of hazardous substances. Tenants leasing contaminated properties come within the “operator” liability designation even if the contamination occurred prior to the tenant’s use of the property. CERCLA provides a liability defense to persons who can show they undertook an all appropriate inquiry, typically a Phase I environmental site assessment, prior to purchasing or leasing the property. This statutory defense, referred to as the bona fide purchaser defense, provides protection against CERCLA liability claims imposed by EPA at a site that has historical environmental contamination, which contamination was not caused by the prospective purchaser or tenant. Subject to compliance with certain conditions, the bona fide purchaser defense applies even when the inquiry reveals the existence of historical environmental contamination on the property to be purchased or leased.
2. What must a tenant do to qualify for CERCLA liability protection from pre-existing contamination?
EPA’s revised guidance now clearly acknowledges that a tenant, as an “operator” under CERCLA of such facility, can have derivative bona fide purchaser liability protection by relying on the landlord’s all appropriate inquiry, i.e. Phase I environmental site assessment, or if the landlord failed to timely undertake the all appropriate inquiry or has acted in a way to invalidate this liability protection, by performing the all appropriate inquiry itself prior to commencing operations on the property.
A person seeking to lease commercial or industrial property with the potential for historical contamination from prior operations should determine if the owner or landlord of the property has timely undertaken an all appropriate inquiry prior to purchasing the property that is to be leased, which inquiry, purchase and lease occurred after January 11, 2002. If not, the tenant may want to consider whether it would benefit from the performance of a Phase I environmental site assessment prior to leasing the respective property to obtain protection from CERCLA liability claims for historical contamination that may exist on the property.
A link to EPA’s guidance document is noted below. Should you have any questions or need guidance please contact Brian Babb at (513) 579-6963.
- Senior Partner
Brian Babb assists public and private companies to navigate, manage, and minimize environmental liabilities and risks under federal and state laws and regulations in acquisitions, divestitures and ongoing business operations ...
Jill Weller has more than 30 years of experience counseling clients on a wide variety of issues under federal and state environmental law. She is a trusted advisor who regularly provides practical solutions to environmental issues ...
- Real Estate Law
- Environmental Law
- U.S. EPA
- SEC Enforcement
- Clean Water Act
- Tax Credit
- Environmental Site Assessment
- Economic Development
- Opportunity Zone
- JOBS Act
- Tax Abatement
- Ohio Foreclosure Reform
- Toxic Substances Control Act
- Receivership Statute
- Employment Law
- CDFI Fund
- Community Development Entities
- Community Development Financial Institutions Fund
- Hazardous Waste
- New Markets Tax Credit
- NMTC Financing
- Pre-Start Construction
- Resource Conservation and Recovery Act
- Title Insurance
- USEPA Guidance
- Construction Litigation
- Ohio Consumer Sales Practices Act
- LEED Certification
- Underground Storage Tank
- Storm Water
- Recent SEC Enforcement Actions Highlight Continuing Disclosure Obligations of Municipal Bond Underwriters
- Ohio Governor Mike DeWine Signs Executive Order Requesting Relief for Small Business Commercial Tenants and Commercial Real Estate Borrowers
- COVID-19 and Commercial Real Estate
- Columbus, Ohio ICSC 2020 Recap – The LLC Membership Interest “Loophole”
- Issues for Residential Landlords Attempting to Navigate Cincinnati's New Security Deposit Legislation
- Legal Alert: EPA Repeal of 2015 "Waters of the United States" Rule
- Columbus, Ohio ICSC 2019 Recap – Land Assemblage Best Practices
- Proposed Creation of the Economic Development Bond Bank
- Proposed Ohio Opportunity Zone Tax Credit
- Ohio Opportunity Zone Designations Within the City of Cincinnati