Are you considering purchasing a commercial or industrial property that may have environmental contamination? Are you curious about the difference between the Ohio EPA Voluntary Action Program and ASTM Phase I ESA/Bona Fide Prospective Purchaser Defense?
Since 1994, the only way for a purchaser in Ohio to receive a release from state-level liability at a contaminated property was to enter into Ohio Environmental Protection Agency’s Voluntary Action Program (VAP), investigate potential contamination, and remediate, if necessary, to obtain a Covenant Not to Sue (CNS). Obtaining a CNS through the VAP is inherently expensive and time consuming. However, as of September 15, 2020, the State of Ohio incorporated the federal definition of a Bona Fide Prospective Purchaser Defense (BFPP) into state law through the enactment of House Bill 168. The BFPP defense was previously only available from the federal level. To be eligible for BFPP status, a purchaser must not only acquire ownership of the property after January 11, 2002, but must also satisfy specific criteria, including three threshold requirements and five continuing obligations. The three threshold requirements include the following:
- The disposal of contamination must have occurred prior to acquisition.
- You must conduct “all appropriate inquiries” into the past and present condition of the property prior to title transfer.
- You must not be affiliated with any potentially responsible party.
The five continuing obligations include the following:
- You must provide all legally required notices with respect to the discovery or release of any hazardous substances on the property;
- You must exercise appropriate care with respect to hazardous substances found at the property;
- You must provide full cooperation, support, assistance, and access to persons authorized to conduct response actions at the property;
- You must be in compliance with land use restrictions and you must not impede the effectiveness or integrity of any institutional controls; and
- You must comply with any request for information or administrative subpoena.
Although the VAP is still a viable option for volunteers to receive state-level liability protection, the new law provides a less costly and timelier option, which may be more appropriate for less contaminated properties and projects on a quicker timeline.
The VAP gives individuals and companies a way to investigate possible environmental contamination, clean it up if necessary and receive a promise from the State of Ohio that no more cleanup is needed. If the property meets applicable standards, a No Further Action Letter is prepared by a Certified Professional (CP) and submitted to the director of Ohio EPA for review. When cleanup requirements are met, the director of Ohio EPA issues a CNS. This covenant protects the property owner or operator and future owners from being legally responsible to the State of Ohio for further investigation and cleanup. This protection applies only when the property is used and maintained in the same manner as when the covenant was issued
Given the VAP’s often lengthy process, it typically doesn’t align with everyday real estate transaction deals which makes the passage of HB 168 so important for brownfield redevelopment in the State of Ohio. Aside from time and cost, other advantages associated with Ohio’s BFPP law are that it applies retroactively to any person who purchased a contaminated property after January 11, 2002 (and their BFPP requirements), and it is self-implementing, not requiring government approval.
If you are engaging in a commercial or industrial property transaction, the federal state-level BFPP defense can offer your business significant environmental liability protection so long as the All Appropriate Inquiries rule is met (e.g., by performing a Phase I ESA) and the BFPP complies with all continuing obligations. Therefore, it is critical to consult with a qualified team that can provide you with a full evaluation of risks that typically accompany the purchase and redevelopment or reuse of a contaminated property.
To understand more about the VAP and Ohio BFPP law, register for our webinar on February 1st!