So you have been following previous posts about environmental liability associated with real estate and because you are a renter, you have ignored it all because you don’t own it. Come on, be honest, you think you don’t have any problems right? Well, you might have lots of problems, but, maybe, just maybe, you should re-read the previous posts to figure out if you can insulate yourself. Of course that is the purpose of this post, so you could just read this instead.
Do, Re, Mi.
So let’s start at the beginning, which is always a good place to start (a reference to the Sound of Music). The law imposes liability upon, among others, current “owners and operators” of a facility. An operator is one who is “operating such facility.” In plain terms, that means a lessee.
Now, CERCLA is a joint and several liability statute without regard to fault. This means, with respect to the current owners or operators, that just the act of being there may impose liability for the clean up of the property, even if you didn’t cause it. So, if you lease a property, you could be liable for the past transgressions of previous owners and lessees. That could be problematic, so what’s a renter to do.
Just Do It (all appropriate inquiry that is).
In December of last year, EPA published a new guidance which clarifies that a lessee is entitled to that new bone fide prospective purchaser defense. As with a purchaser, the defense allows you to lease property even if you know it is contaminated, while leaving the cost of cleaning it up to someone else.
But let’s recap what you need to do to maintain the defense. You must do the same things the purchaser does before you lease the property, as well as those things the purchaser must do after taking possession. A brief recap would be helpful.
A Brief Recap.
You are not eligible if you are affiliated with anyone who is potentially responsible for the contamination at the property (EPA says they won’t treat the lease as a prohibited affiliation. Whew). And, the pollution also had to happen before the lease. Here is the real kicker, you will need to do your “all appropriate inquiry into the environmental condition of the property.” So that means you must ask an environmental consulting firm to do an audit that either follows the requirements of ASTM 1527-05, or the regulations promulgated by EPA as they were required to do by the Amendments.
But you aren’t done, after you take possession of the property, you must:
- Take reasonable steps to stop any continuing release;
- Prevent any threatened future release;
- Prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance;
- Provide all legally required notifications (which may or may not be limited to environmental reporting); and,
- Be in compliance with land use restrictions or institutional controls in order to maintain the new defense.
The cool thing about all this is that if you do this, you won’t have to investigate the property or clean up messes called by others. And what is even cooler is that you can take advantage of the defense even if the lessor can’t take advantage of the defense.
Now, the guidance says that “the tenant may derive BFPP status from an owner who satisfies the BFPP criteria. In fact, you won’t have “any independent duty to carry out those responsibilities” (including hiring someone to do the AAI). That is really cool, as long as the landlord does what she is supposed to do. Which means if she blows it, then you may be right back in the mix of PRP’s.
But, if you do all of the requirements yourself, then EPA “intends to treat tenants as BFPPs if their lease agreement was executed after January 11, 2002 and they meet the other BFPP provisions. . .” So, it might just make sense for you to go ahead and do all of this yourself. The total cost of the steps might just be cheap insurance for the past problems of others.
You can contact me at gschmittgens@evans-dixon.com if you have any questions. Thanks for reading.
