Buying and developing a brownfields piece of property comes with both promise and consideration. In the past, environmental issues have played a major role during the decision-making process. However, the times have changed and environmental considerations aren't what they used to be. Formerly a roadblock to site development, environmental contamination is now just a hurdle, and often, one well worth jumping.

Liability Protections Under The 2002 Brownfields Amendments

The Brownfields Amendments, enacted in 2002, amended CERCLA to offer certain liability limitations for parties who own or who are otherwise seeking to purchase land. Collectively, called the “landowner provisions,” the Brownfields carved out a special category, the bona fide prospective purchaser (BFPP), for persons specifically purchasing land with knowledge of environmental contamination. Provided that the purchaser seeking BFPP status follows the statutory guidelines, he may be shielded from liability, notwithstanding his knowledge of the property's contamination prior to purchase.

A prospective purchaser must meet the following threshold requirements to obtain BFPP status:

1) Conduct all appropriate inquiry

2) Exhibit no affiliation to a liable or potential party

All Appropriate Inquiry

First, a party seeking BFPP status must conduct all appropriate inquiry (AAI), an investigation into the prior ownership, use(s) and environmental status of the property being considered for purchase. In most cases, environmental professionals are hired to conduct AAI on behalf of purchasers. Purchasers should take caution in evaluating candidates for conducting AAI, as it is an integral step in obtaining BFPP status, and recent law has changed regarding AAI. The Environmental Protection Agency recently published the standard regarding AAI, including who qualifies as an “environmental professional,” as well as certain criteria for evaluating former uses of property. This standard represents changes in what has been otherwise standard protocol for the last several years. The new standard officially goes into effect Nov. 1 of this year; however, anyone considering a purchase of property should plan for its implementation now, as the applicable standard will likely be judged as of the date of closing of a transaction, and many deals have significant lead times prior to closing.

AAI activities to consider under the new standard include:

* Interviews with past and present owners, operators and occupants

* Reviews of historical sources of information

* Reviews of federal, state, tribal and local government records

* Visual inspections of the facility and adjoining properties

*Degree of obviousness of the presence of contamination at the property and the ability to detect the contamination

* Searches for environmental cleanup liens

*Assessments of any specialized knowledge or experience of the prospective landowner

* An assessment of the relationship of the purchase price to the fair market value of the property

No Affiliation With Liable Party

Second, the purchaser must demonstrate that he has no “affiliation” with a liable party. An affiliation exists in a familial, contractual, corporate or other financial relationship with a party responsible or potentially responsible for response costs at the property.

Continuing Obligations

Once the requisite threshold obligations are established, a party seeking BFPP status must meet continuing obligations. These include remaining in compliance with land use restrictions and any institutional controls in place at the site prior to purchase, taking reasonable steps with respect to hazardous substances on the site, providing cooperation and assistance with authorized persons conducting any response actions, complying with any CERCLA information requests and administrative subpoenas, and providing any legally required notices.

Compliance With Land Use Restrictions And Institutional Controls

A BFPP must be in compliance with any land use restrictions established or relied on in connection with a response action that was taken to clean the property that the purchaser bought. Generally, institutional controls are placed into four categories: 1) governmental controls (zoning); 2) proprietary controls (covenants/easements); 3) enforcement documents (orders/consent decrees); and 4) informational devices (land record/deed notices). Further, a BFPP must not hinder the effectiveness on any institutional control employed in connection with a response action.

Reasonable Steps

The requirement that after purchase a party take “reasonable steps” with respect to hazardous substances on the site to maintain its liability exemption requires the party to: (1) stop continuing releases; (2) prevent threatened future releases; and (3) prevent or limit human, environmental or natural resource exposure to earlier hazardous substance releases. The particular actions required are determined on a site-specific basis.

Cooperation, Assistance And Access

A BFPP must also provide full cooperation, assistance and access to persons who are authorized to conduct response actions or natural resource restoration at a facility from which there had been a release — i.e., a brownfield. This includes actions such as necessary access for the installation, integrity, operation, and maintenance of any complete or partial response action or natural resource restoration at the facility.  In any case, where cleanup measures were not complete, or had not begun, a BFPP would be required to provide full cooperation in order to achieve the planned restorative measure.

Compliance With Information Requests And Administrative Subpoenas

BFPPs must comply with CERCLA information requests and administrative subpoenas. In particular, the EPA expects timely, accurate and complete responses to information requests, but may exercise enforcement discretion when faced with inconsequential errors (i.e., sending a response to an incorrect EPA address) so long as the party meets the other conditions of the applicable liability provision it is asserting.

Providing Legally Required Notices

BFPPs are also subject to “notice” requirements under the Brownfields Amendments. The provisions mandate a continuing obligation to provide all legally required notices with respect to the discovery or release of any hazardous substances at a site. After purchase, should any release occur, the new purchaser/BFPP is under a continuing obligation to report the release.

Other Considerations

Virtually gone is the so-called stigma associated with “dirty” land. Although such a stigma may be an addition to one of the above hurdles to jump before closing the deal, a brownfields site is a site ripe for development as green sites are becoming more difficult to find. Further, insofar as purchase price, a brownfields site will likely never earn a seller an equivalent dollar amount as would a “clean” site. However, it is possible to profit from a piece of property that was formerly seen as a wasteland. A potential purchaser seeking to use the BFPP liability protection and can meet the continuing obligations can not only purchase and profit from a brownfield, but they can also be protected from future liability.

Shelby Sheffield is an associate with Waller Landsmen Dutch & Davis' Nashville, Tenn. office. She can be contacted by e-mailing shelby.sheffield@wallerlaw.com. Visit the firm at www.wallerlaw.com.