Bona Fide Prospective Purchasers
The bona fide prospective purchaser (BFPP) provision in the 2002 amendments to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly referred to as Superfund) dramatically changed the Superfund liability landscape for landowners, as a party can now achieve and maintain status as a BFPP, so long as that party meets specific statutory criteria.
Persons may now acquire property knowing, or having reason to know, of contamination on the property if they:
- acquire property after January 11, 2002,
- do not impede the performance of a response action or natural resource restoration,
- and meet the threshold criteria and ongoing obligations outlined in the statute and described below and in the supporting guidance.
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Threshold Criteria and Continuing Obligations
To qualify as a BFPP under CERCLA a landowner must meet certain threshold criteria that include the performance of “all appropriate inquiries” (AAI) before acquiring the property. In addition, a person wishing to assert BFPP status must meet continuing obligations which include exercising appropriate care with respect to hazardous substances found at the property by taking “reasonable steps” to stop any continuing release and to prevent any threatened future release.
For information on the BFPP criteria and obligations, visit the Common Elements and other Landowner Liability Guidance webpage.
The United States may pursue a "windfall lien" on a BFPP’s property where an EPA funded cleanup action increased the fair market value of the property. The amount of a windfall lien shall be the lesser of the unrecovered cleanup costs or the increase in fair market value at the property attributable to the Superfund cleanup. The Agency's EPA’s "Interim Enforcement Discretion Policy Concerning ‘Windfall Liens’ Under Section 107(r) of CERCLA" (7/16/2003) identifies the factors that may lead the United States to assert a windfall lien on a BFPP’s property. The policy also provides examples of situations where the EPA will generally not pursue a windfall lien and describes the EPA and DOJ’s approach to settling windfall liens. Finally, the policy provides a sample “comfort/status letter” that explains to the recipient whether the EPA believes there is a possible windfall lien applicable to the property, and a model settlement document, which the EPA may use to settle any applicable windfall lien provision in exchange for monetary or other adequate consideration. More information on windfall liens is available from the liens category in the Superfund enforcement policy and guidance database.
Tenants as BFPPs
Leasehold interests play an important role in facilitating the cleanup and reuse of contaminated properties. Under current CERCLA case law, the mere execution of a lease does not necessarily make a tenant liable as an owner or operator under CERCLA.
In 2012, the EPA issued the Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision ("2012 Tenants Guidance") to address leaseholder concerns about liability when they are involved in the cleanup and reuse of contaminated properties.
On March 23, 2018, Congress passed the Brownfields Utilization, Investment, and Local Development Act (Build Act) to revise CERCLA's definition of a BFPP to include those who acquire a leasehold interest in a property and meet certain criteria. The updated definition creates three conditions under which a party with a “leasehold interest” in a facility may meet the definition of a BFPP:
- The owner of the facility is a BFPP;
- The owner was a BFPP at the time the leasehold interest was acquired but has lost BFPP status through no action of the lessee and the lessee establishes the criteria in Section 101(40) (with the exception of the requirement for conducting “all appropriate inquiries”); or
- The party with a leasehold interest independently meets the criteria in Section 101(40) of CERCLA.
The updated BFPP definition closely follows the approach set forth in the EPA’s 2012 Tenants Guidance and, as a result, the Agency currently is evaluating the impact the updated definition will have on the tenants guidance.
Other Superfund landowner liability protection information is available on the following webpages:
- Contiguous Property Owners
- Third Party Defenses/Innocent Landowners
- Residential Property Owners and Lenders
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