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Bona Fide Prospective Purchaser (BFPP) — In June 2002, the United States Environmental Protection Agency (EPA) issued guidance in relation to the prospective purchaser provisions of the Brownfields amendments to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq., as amended. When the Small Business Relief and Brownfield Revitalization Act or Brownfields Amendments were enacted, EPA wanted to make sure buyers of contaminated property would have an easy path to redevelopment.
The new Amendments will hopefully make property transactions more efficient since EPA will not have to be involved prior to these new rules. Prospective purchasers of contaminated property who have knowledge of the contamination will be required to negotiate prospective purchaser agreements (PPA) with environmental covenants or other mechanism to avoid liability and lawsuits under CERCLA after purchasing the property. To avoid this process, a prospective purchaser needs to meet the criteria of a "bona fide prospective purchaser".
NDEP does not however make BFPP determinations. All Prospective Purchasers should use legal counsel to help determine if they meet the BFPP criteria.
Criteria for becoming a BFPP is outlined below and is taken from EPA guidance:
Subtitle B of the new Brownfields Amendments, through the addition of CERCLA section 107(r), provides a limitation on liability for a "bona fide prospective purchaser" whose potential liability is based solely on the purchaser's being an owner or operator of a facility, and provided that the purchaser does not impede the performance of a CERCLA action. New subsection 101(40) defines "bona fide prospective purchaser" as a person, or tenant of that person, who acquires ownership of a facility after the date of enactment of the Brownfields Amendments, January 11, 2002, and by a preponderance of the evidence establishes the following:
- Disposal at the facility occurred prior to acquisition;
- The person made all appropriate inquiry into previous ownership and uses of the facility in accordance with generally accepted practices and in accordance with the new standards contained in section 101(35)(B);
- The person provides all legally required notices with respect to hazardous substances found at the facility;
- the person exercises "appropriate care" with respect to the hazardous substances found at the facility by taking "reasonable steps" to:
- a. stop any continuing releases;
- b. prevent any threatened future release;
- c. prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance;
- the person provides full cooperation and access to the facility to those authorized to conduct response;
- the person is in compliance with any land use restrictions and does not impede the effectiveness or integrity of any institutional control;
- the person complies with any information request or administrative subpoena under CERCLA; and
- the person is not potentially liable for response costs at the facility or "affiliated" with any such person through
- a. direct or indirect familial relationship or
- b. any contractual, corporate or financial relationship (excluding relationships created by instruments conveying or financing title or by contracts for sale of goods or services.)
The BFPP provisions represent a significant change in CERCLA. For the first time, a party may purchase property with knowledge of contamination and not acquire liability under CERCLA as long as that party meets the BFPP criteria. The new amendments should provide significant savings of time and transaction costs. Private parties will now be able to avoid the costs associated with negotiating PPAs, and the timing of the transaction will be within the control of the parties to the transaction and need not await federal government approval of the terms of a PPA. (Read the full document )
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