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Enforcement

Landowner Liability Protections

Overview

Historically, under Superfund, the owner or operator of a contaminated property could be held responsible for the property's cleanup, based solely on his/her current ownership of the property. In 2002, Congress enacted the Brownfields Amendments, which amended the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly known as Superfund) by adding new landowner liability protections (and clarifying the existing innocent landowner protection) and by providing funding for grants for the assessment and cleanup of brownfields.

The liability protections are for landowners/tenants who qualify as:

  • bona fide prospective purchasers (BFPPs),
  • contiguous property owners (CPOs), or
  • innocent landowners (ILOs).

These landowner liability protections are self-implementing and, therefore, EPA generally will not need to be involved in site-specific liability determinations. Since enactment of the 2002 Brownfields Amendments to CERCLA, EPA has developed guidance documents, model enforcement documents, responses to frequently asked questions, fact sheets, and other documents to clarify the landowner liability protections and support revitalization of contaminated land.

Bona Fide Prospective Purchasers

The bona fide prospective purchaser (BFPP) provision in the 2002 Brownfields Amendments 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.

In this section:

Threshold Criteria and Continuing Obligations

To qualify as a BFPP under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly known as Superfund), 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.

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Windfall Liens

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. 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 EPA will generally not pursue a windfall lien and describes EPA and DOJ’s approach to settling windfall liens. Finally, the policy provides a sample “comfort/status letter” that explains to the recipient whether EPA believes there is a possible windfall lien applicable to the property, and a model settlement document, which 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.

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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, EPA issued the “Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision” 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), which amended Section 101(40) of CERCLA to revise the definition of a bona fide prospective purchaser (BFPP) to include those who acquire a leasehold interest in a property and meet certain criteria. This provision creates three conditions under which a party with a “leasehold interest” in a facility may meet the definition of a BFPP:

  1. the owner of the facility is a BFPP;
  2. 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
  3. the party with a leasehold interest independently meets the criteria in Section 101(40) of CERCLA.

The amendment to Section 101(40) closely follows the approach set forth in EPA’s 2012 enforcement guidance and, as a result, the Agency currently is evaluating the impact of the new statutory provisions on the guidance.

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Contiguous Property Owner

The 2002 Brownfields Amendments created a liability protection for landowners who own property that is or may be contaminated, but are not the original source of the hazardous substance contamination, commonly referred to as contiguous property owners (CPO). This provision protects parties who are victims of contamination from a neighboring property.

Similar to BFPPs, CPOs must meet certain threshold criteria and ongoing obligations. However, unlike a BFPP, persons who know, or have reason to know, prior to purchase, that the property is or could be contaminated, cannot qualify for the CPO liability protection. These parties, nonetheless, may still be entitled to rely on the BFPP statutory protection or EPA may exercise its enforcement discretion not to pursue such persons as set forth in EPA’s 1995 Contaminated Aquifer Policy.

In this section:

Threshold Criteria and Continuing Obligations

Like BFPPs, to qualify as a CPO, a landowner must meet certain threshold criteria including performing “all appropriate inquiries” prior to acquiring the property, demonstrating no “affiliation” with a liable party, and demonstrating that the landowner did not know or have reason to know that the property was or could be contaminated from other real property not owned or operated by the landowner. A CPO must also meet continuing obligations, such as complying with land use restrictions, not impeding the effectiveness or integrity of institutional controls, and taking “reasonable steps” to stop any continuing release and to prevent any threatened future release.

In 2004, EPA issued the Interim Enforcement Discretion Guidance Regarding Contiguous Property Owners, which addresses the statutory protection in more detail. For more information on the CPO criteria and obligations, visit the Common Elements and Other Landowner Liability Guidance webpage.

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Contaminated Aquifer Policy

Owners of property above aquifers contaminated from an off-site source may be concerned about Superfund liability even though they did not cause and could not have prevented the ground water contamination.

In 1995, prior to the Brownfields Amendments, OSRE developed the Final Policy Toward Owners of Property Containing Contaminated Aquifers (5/24/1995) in response to this concern. The policy states that EPA will not require cleanup or the payment of cleanup costs if the landowner did not cause or contribute to the contamination. It also states that if a third party sued or threatened to sue, EPA would consider entering into a settlement with the landowner covered under the policy to prevent third party damages being awarded.

In the Brownfields Amendments, the CPO liability protections said that “reasonable steps” required of a contiguous property owner do not include conducting groundwater investigations or installing groundwater remediation systems, except in accordance with the EPA’s 1995 Contaminated Aquifers Policy. Subsequently, EPA clarified the relationship of the Contaminated Aquifer Policy to the CPO liability protection in the 2004 the Interim Enforcement Discretion Guidance Regarding Contiguous Property Owners.

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Third-Party Defense/Innocent Landowners

Entities that acquire property and had no knowledge of the contamination at the time of purchase may be eligible for CERCLA’s third-party defense or "innocent landowner" (ILO) defense to Superfund liability in addition to the BFPP liability protection.

In this section:

Third-Party Defense

Section 107(b) of CERCLA includes the following defenses to liability if a person can show, by a preponderance of the evidence, that the contamination was solely caused by:

  • Acts of God;
  • Acts of war;
  • Acts or omissions of a third party.

To invoke CERCLA’s third party defense, the third party’s act or omission must not occur “in connection with a contractual relationship.” Moreover, an entity asserting the third-party defense must show that: (a) it exercised due care with respect to the contamination; and (b) it took precautions against the third party’s foreseeable acts or omissions and the consequences that could foreseeably result from such acts or omissions.

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Innocent Landowner Defense

The Superfund Amendments and Reauthorization Act of 1986 expanded the third-party defense by creating innocent landowner exclusions to the definition of a “contractual relationship.” Previously, the deed transferring title between a PRP and the new landowner was a “contractual relationship” that prevented the new landowner from raising the traditional CERCLA third party defense. To promote redevelopment and provide more certainty, Congress created the “innocent landowner defense,” which requires an entity to meet a set of continuing obligations similar to what is required of BFPPs. (See Common Elements and Other Landowner Liability Guidance Web page for more information.) In addition, the landowner must meet the requirements set forth in the original third-party defense.

CERCLA distinguishes three types of innocent landowners:

  • Purchasers who acquire property without knowledge of contamination and who have no reason to know about the contamination;
  • Governments “which acquired the facility by escheat, or through any other involuntary transfers or acquisition, or through the exercise of eminent domain authority by purchase or condemnation;” and
  • Inheritors of contaminated property.

Like contiguous property owners (CPOs), persons desiring to qualify as innocent landowners must perform "all appropriate inquiries" prior to purchase and cannot know, or have reason to know, of contamination in order to have a viable defense as an innocent landowner. The 2002 Brownfields Amendments partially amended the innocent landowner defense by elaborating on the all appropriate inquiries requirement.

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Residential Owners and Lenders

Residential Property Owners

In 1991, EPA issued its Policy Towards Owners of Residential Properties at Superfund Sites (7/3/91) to relieve residential owners of the fear that they might be subject to an enforcement action involving contaminated property, even though they had not caused the contamination on the property.

Residential property owners who purchase contaminated property after January 11, 2002, can also take advantage of the statutory BFPP protection by clarifying the type of pre-purchase investigation that a residential property owner must conduct, e.g., an inspection and title search.

Liability Protections for Financial Institutions

Congress enacted the “Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996,” which amended Superfund’s secured creditor exemption under the owner/operator definition for lenders who hold ownership in a CERCLA facility primarily to protect their security interest in that facility, provided they do not “participate in the management of the facility.

More information on lender liability is available from the liability-lenders category in the Superfund enforcement policy and guidance database.

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