Protections Under Federal and Ohio Law for Bona Fide Prospective Purchasers of Contaminated PropertyClient Alert
Most industrial/commercial property developers are generally aware of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), often also referred to as “Superfund”. CERCLA, a United States federal law administered by the U.S. Environmental Protection Agency, was created, in part, because the U.S. Environmental Protection Agency recognized that environmental cleanup could help promote reuse or redevelopment of contaminated, potentially contaminated, and formerly contaminated properties, helping revitalize communities that may have been adversely affected by the presence of the contaminated properties. Commercial property developers should be aware that CERCLA provides for some important liability limitations for landowners that own contaminated property impacted by materials hazardous to the environment. It can also assist with landowners concerned about the potential liabilities stemming from the presence of contamination to which they have not contributed. In particular, CERCLA provides important liability limitations for landowners that qualify as (1) bona fide prospective purchasers (BFPPS), (2) contiguous property owners, or (3) innocent landowners.
A relatively new Ohio law works in tandem with CERCLA to make purchasing contaminated properties in Ohio a bit less risky for the BFPPs. By way of a quick recap of CERCLA before discussing Ohio law, the 2002 amendments to CERCLA created landowner liability protections, including protection for BFPPs as mentioned above. The BFPP provision protects a party from Superfund owner/operator liability for a party that acquired property after January 11, 2002 by way of providing for available affirmative defenses to liability for said developers involved in certain remedial activities. These protections are immensely important as CERCLA imposes strict, joint, and several liabilities on property owners/operators for releases of hazardous substances into the environment, meaning that remediation costs can be overwhelming for parties that did not necessarily cause the contamination. BFPPs are able to purchase property with knowledge of contamination so long as the BFPP meets certain statutory criteria. The statutory criteria include conducting all appropriate inquiries into the previous ownership and uses of the property, disposal of hazardous substances at the property that occurred prior to the acquisition, providing all of the legally required notices regarding any releases, cooperating with those conducting response actions at the property, complying with any institutional land use or engineering controls, and taking the appropriate steps and care with regard to any hazardous substances at the property.
The new Ohio law that went into effect on September 15, 2020 through the enactment of House Bill 168 has been codified in Ohio Revised Code 3746.122. It is a new BFPP defense from liability that in large part mirrors the defense under CERCLA. It is available as a defense for any BFPP where the acquiring landowner qualifies under the same BFPP factors referenced above with a couple additional qualifications – the cause of action against the person must be due to the person’s status as an owner or operator of the facility, and the person must not impede the state’s actions in responding to a release or threatened release of hazardous substances. The main advantage of Ohio’s law is that prior to the Ohio law went into effect, there was not a similar defense to state-level liability for BFPPs. This often left BFPPs dealing with state-level liability with no choice other than to work through the Ohio Voluntary Action Program in order to obtain a Covenant Not to Sue from the State of Ohio, requiring a certified professional to issue a no Further Action Letter and for Ohio to issue a Covenant Not to Sue based on the No Further Action Letter. This was frequently a very expensive and time-consuming process that was often avoided. The new Ohio law, however, requires no affirmative government approval to take effect.
Ohio’s law pertaining to BFPP defense does differ, however, from CERCLA as it does not provide blanket immunity from liability in any action brought by the federal government or a private citizen. Instead, Ohio’s law only provides immunity in an action brought by the state to recover investigative or remedial costs, where the basis for liability is the person’s status as an owner or operator. This is obviously a narrower scope than CERCLA. Nonetheless, it is surely a welcome law for any individual or entity that has purchased commercial property in Ohio that may contain hazardous material.