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Recent Amendments To CERCLA Establish New Protections For Lessees And Create New Avenues For Nonprofit/Community Development Entities Via Access To Superfund Resources

on Wednesday, 16 May 2018 in Dirt Alert: David C. Levy, Editor

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) imposes strict joint and several liability on both “owners” and “operators” of contaminated real property. Both a landlord and a tenant are subject to CERCLA liability (regardless of fault). This concept is often misunderstood by lessees who assume that they (as tenants) are not subject to CERCLA liability. Moreover, until recently, a tenant’s access to affirmative defenses to CERCLA liability was limited to a guidance document published by the Environmental Protection Agency.

The Brownfields Utilization, Investment, and Local Development (“BUILD”) Act of 2018, signed into law on March 23, 2018, amends several provisions of CERCLA. The BUILD Act expands CERCLA’s definition of a “bona fide prospective purchaser” to include lessees of property who entered into a lease after January 1, 2002, and either: (i) personally satisfy CERCLA’s bona fide prospective purchaser requirements; or (ii) leased property from a landlord who would have qualified as a bona fide prospective purchaser when the tenant’s leasehold began. Additionally, BUILD excludes leases from the “contractual relationship” exception to establishing a bona fide prospective purchaser defense. This amendment allows a bona fide prospective purchaser lessee to maintain its protected status despite contracting with a landlord deemed to be a “potentially responsible party.”

The BUILD Act also expands the types of entities that qualify for brownfield revitalization funding by including both 501(c)(3) nonprofit organizations and community development entities (as defined in section 45D(c)(1) of the Internal Revenue Code). Accordingly, these types of entities are now eligible for Brownfields grants and loans. These amendments, when coupled with existing state voluntary cleanup and Brownfield programs, may encourage efforts to restore and revitalize previously abandoned or underutilized properties throughout the nation.

Like all new legislation, the BUILD Act may create hazards arising from its implementation and interpretation. The pragmatic focus moving forward is ensuring that members of the public fully understand and utilize the BUILD Act’s amendments to CERCLA while avoiding regulatory pitfalls along the way.

Benjamin E. Busboom

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