Frequent Questions About Legal Issues
Note: The information provided below should not be relied upon as legal advice. It is recommended that you obtain experienced environmental legal counsel to provide legal advice when purchasing a Superfund site or other contaminated property.
There are complex legal issues associated with reuse of all Superfund sites. In most cases, the legal issues can be addressed and properly managed by using a variety of liability protections/limitations made available by law or through other legal resources made available by EPA. This page answers the following common questions about legal issues related to the reuse of Superfund sites.
- I want to purchase a Superfund site or property within a Superfund site - what do I need to know about Superfund liability?
- How do I obtain federal Superfund status as a 'bona fide prospective purchaser'?
- What are the eight criteria that need to be complied with to become a 'bona fide prospective purchaser'?
- What Superfund site reuse information or tools are available?
- What about EPA Superfund cost recovery liens and Superfund Windfall liens?
- Can a 'bona fide prospective purchaser' clean up part or all of the site in order to use it more quickly?
I want to purchase a Superfund site or property within a Superfund site - what do I need to know about Superfund liability?
Prior to the enactment of the Brownfield Amendments in 2002, purchasers of Superfund sites were potentially liable for the cost of site cleanup. The Brownfield Amendments were enacted to amend the Superfund law and provide important protections/limitations from Superfund liability to landowners who meet certain statutory criteria. Purchasers of Superfund sites or properties within Superfund sites are protected from owner or operator liability under the Superfund law so long as the new purchaser meets the statutory definition of a 'bona fide prospective purchaser.' The liability of a 'bona fide prospective purchaser' is limited to any potential windfall associated with the enhanced value of the property resulting from EPA cleanup activities.
Whether you are interested in purchasing, using, or selling a Superfund site, there are important factors to consider:
- consider obtaining legal counsel to advise you about Superfund liability and possible liability protections/limitations before taking title and/or using the site; and
- always ensure that your use of the site does not:
- interfere with the ongoing cleanup or engineered controls at the site; or
- cause a release of hazardous substances into the environment; otherwise you could become responsible for the cost of site cleanup.
How do I obtain federal Superfund status as a 'bona fide prospective purchaser' (BFPP)?
The 2002 Brownfields Amendments specify that purchasers of contaminated property are protected from owner or operator liability under the Superfund law so long as the new purchaser meets the definition of a 'bona fide prospective purchaser.' The liability of a 'bona fide prospective purchaser' is limited to any potential windfall associated with the enhanced value of the property resulting from EPA cleanup activities.
Under the bona fide prospective purchaser provision (U.S.C. Section 9601(40)) a new purchaser:
- will not incur Superfund liability as an owner of a Superfund site if the purchaser acquires the site after January 11, 2002 and complies with eight specified criteria;
- must achieve and maintain bona fide prospective purchaser status for as long as potential liability exists to remain exempt from Superfund owner/operator liability for the existing contamination at the site and to limit liability to any windfall; and
- is solely responsible for achieving and maintaining 'bona fide prospective purchaser' status.
What are the eight criteria that need to be complied with to become a 'bona fide prospective purchaser'?
- all disposal of hazardous substances occurred before acquisition;
- the person made all appropriate inquiries about the property before acquisition;
- the person provided all legally required notices with respect to discovery or release of any hazardous substances at the facility;
- the person exercises appropriate care with respect to hazardous substances found at the site by taking reasonable steps to stop and prevent releases and limit human and environmental exposure to any previous release;
- the person provides full cooperation and access to EPA or other specified government officials;
- the person complies with land restrictions in connection with the response action and does not impede the effectiveness of an institutional control;
- the person complies with requests for information and subpoenas; and
- the person is not potentially liable or affiliated with a potentially responsible party ("PRP").
Some of the 'bona fide prospective purchaser' criteria must be satisfied prior to purchase and others are ongoing obligations after purchase of the Superfund site. EPA has issued common elements guidance (PDF) (22 pp, 366K) which further explains the eight criteria. One example of a criterion that must be satisfied prior to purchase is that a 'bona fide prospective purchaser' must perform 'all appropriate inquiry' (AAI) concerning environmental conditions at the site before acquisition. The Final Rule for AAI, which set forth standards for satisfying the criterion, became effective on November 1, 2006. Review EPA's latest information on how to comply with this criterion.
What Superfund site reuse information or tools can I get?
At each site, EPA will work with prospective users to ensure that they understand the liability issues associated with a Superfund site. EPA has several tools available to provide more certainty to parties interested in purchasing or reusing Superfund sites, depending upon the relationship of the interested party to the site. Please note: EPA cannot give prospective purchasers legal advice. Legal advice must be sought from private legal counsel, but EPA can explain the available liability protections.
A comfort/status letter may be issued to clarify the likelihood of EPA involvement at a site, identify liability protections/limitations potentially available to the prospective purchaser, identify whether the property is subject to an EPA lien, or to indicate the progress of a Superfund cleanup.
What about EPA liens?
The Superfund law provides EPA with the authority to use two types of liens that may affect a Superfund site:
- Superfund Cost Recovery Lien: Superfund section 107(l) allows EPA to file a "Superfund cost recovery lien" on site property which is owned by a potentially responsible party and which is the subject of a Superfund cleanup.
- A Superfund Lien entitles EPA to recover its cleanup costs from the site property. EPA can place a Superfund lien on any real property where Superfund expenditures have been made. Read more about Superfund Liens.
- Windfall Lien: Superfund section 107(r) allows EPA to file a "windfall lien" on site property owned by a 'bona fide prospective purchaser.' It is designed to prevent a private entity from realizing an unfair windfall from the purchase of a property that has been cleaned up using taxpayer dollars. Read more about Windfall Liens.
Common features of Superfund and Windfall Liens:
- Both types can be released or waived upon satisfaction before you close on the site.
- EPA may be willing to negotiate a settlement of the lien(s) and any settlement will be documented in a settlement agreement.
- EPA may seek cash consideration, performance of work, or a combination of such considerations in connection with the lien releases.
- Because both types of liens affect the total value of the property, lien settlement negotiations may need to include EPA, the current property owner, and you as the 'bona fide prospective purchaser.'
- Because both types of liens draw from the same available equity in a site property, often the liens can be resolved or settled concurrently.
- In addition, EPA may also issue a comfort/status letter to prospective purchasers or their lenders to describe the status of any EPA liens.
What is a Windfall Lien?
A Windfall Lien is designed to prevent a private entity from realizing an unfair windfall from the purchase of a property that has been cleaned up using taxpayer dollars. Authorized by Section 107(r) of the Superfund law, a Windfall Lien can be placed on a Superfund site for the increase in the fair market value of that property attributable to EPA's cleanup efforts.
A Windfall Lien can only arise on sites where the United States spends money cleaning up the property and is not reimbursed by a responsible party. The lien amount is limited to the lesser of EPA's unrecovered response costs or the increase in fair market value attributable to EPA's cleanup.
If EPA will substantially increase the fair market value of a Superfund site because of its cleanup and has unreimbursed response costs, then EPA will evaluate whether the purchaser would be unfairly enriched by the increase in value. If so, EPA will offer to settle the value of the windfall amount with the 'bona fide prospective purchaser' based on the criteria in the 2001 Prospective Purchaser Agreement (PPA) Guidance (PDF) (9 pp, 72K) or perfect a Windfall Lien on the site for that amount.
Can a 'bona fide prospective purchaser' clean up part or all of the site in order to use it more quickly?
Yes. Purchasers who achieve and maintain status as a 'bona fide prospective purchaser' are not liable for existing contamination (contamination present on the site when the 'bona fide prospective purchaser' purchased the site), but may nonetheless want to voluntarily clean up their property, rather than wait for the potentially responsible party or the government to do it. When appropriate, EPA will enter into a 'Doing Work' agreement with a 'bona fide prospective purchaser' willing to perform a cleanup action at a site and resolve potential Windfall Lien issues. A 'bona fide prospective purchaser' may choose to perform the cleanup for several reasons. For instance, the 'bona fide prospective purchaser' may be able to:
- better coordinate cleanup activities into its reuse and/or redevelopment plans in terms of timing;
- negotiate a lower purchase price from the seller by undertaking cleanup work that the seller would otherwise be responsible for;
- settle a Windfall Lien (see above) if it agrees to perform all or part of a necessary cleanup; and/or
- recover costs from responsible parties under appropriate circumstances.
Review EPA's 'Bona Fide Prospective Purchaser' (BFPP) Removal Model Agreement (PDF) (32 pp, 242K), which clarifies EPA's continuing effort to promote land reuse and revitalization by addressing potential liability concerns associated with acquiring and cleaning up contaminated removal sites.
If you still have legal questions not answered above, consult your experienced legal counsel.