Bona Fide Prospective Purchaser Defense in Bankruptcy: Environmental Liability Shield and Sale Price Maximizer

Under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.S. § 9601) ("CERCLA"), current owners and operators of real property are strictly liable for costs to clean-up environmental contamination regardless of whether the contamination existed prior to their ownership. Upon closing, a purchaser becomes a current owner under the statute and, therefore, has strict liability for such costs. See 42 U.S.C.S. § 9601 and 1-1 Environmental Law in Real Est. & Bus. Transactions § 1.03 for further detail. This results in environmentally contaminated properties typically having a significantly reduced market value and may render them completely unsellable. The rarely used Bona Fide Prospective Purchaser ("BFPP") defense, however, may completely shield a prospective purchaser from CERCLA liability stemming from pre-existing contamination and may facilitate the alienability of the contaminated property. For a discussion on environmental concerns in real estate ...