Effective on July 1, House Bill 957 (2014) (the “Amendment”) amended the Georgia Brownfield Act, O.C.G.A. § 12-8-200 et seq. (the Act). The Amendment broadens applicability of the Act, expands the pool of eligible parties under the Act, and clarifies the transferability of the limitation of liability provided by the Act. As competition to redevelop property in urban markets throughout Georgia increases, more developers may find the revised Act attractive in light of certain property tax incentives offered by the Georgia Brownfield Program.
Background and Purpose of the Georgia Brownfield Act
Enacted in 1996, the Act encourages the redevelopment of contaminated sites by providing a limitation of liability and tax incentives to prospective purchasers of designated brownfield sites. Since 2002, the Act has facilitated the redevelopment of more than 500 brownfield sites throughout Georgia, including Atlantic Station.
A property is eligible under the Act if a property has a preexisting release of hazardous material, the Georgia Environmental Protection Division (the EPD) has satisfied all liens filed against the property, and the property does not fall under certain federal environmental programs, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
Limited Liability Under the Act
A prospective purchaser of a contaminated property is eligible for limited liability under the Act only if the prospective purchaser (or an affiliated party) has not contributed to a preexisting release of hazardous substance at the property. To obtain the limitation of liability, the prospective purchaser is required to submit a corrective action plan to the director of the EPD. The corrective action plan must enumerate the steps that the prospective purchaser will take to bring the property into compliance with the applicable regulations.
Upon gaining the EPD director’s approval of the corrective action plan, the prospective purchaser will need to complete the corrective action plan in the time specified by the plan. Upon either the EPD director’s approval of the corrective action plan or concurrence with the certificate of compliance, the prospective purchaser will not be liable to the state or any third party for damages resulting from preexisting releases on the property.
Tax Incentives for Participating in the Brownfield Program
In addition to the limited liability described above, a property that participates in the Georgia Brownfield Program is eligible for ad valorem tax abatement up to the certified costs of cleaning up the property. Naturally, remediated and redeveloped brownfield sites gain property value. Under the Act, the property value of a brownfield site subject to ad valorem taxation can be frozen at the property value of the property prior to redevelopment for 10 years or until the property realizes tax savings equal to the certified cost of the cleanup, whichever comes first.
Effect of the Amendment on the Georgia Brownfield Act
House Bill 957 expands the scope of the Georgia Brownfield Act to allow greater protection to parties that develop brownfield sites. This protection is accomplished through amending certain definitions within the Act and through clarifying certain code sections.
Expansion of Eligible Purchasers
The Amendment expands the pool of eligible prospective purchasers to include parties that acquire any property interest in a qualifying property, whether such interest is exclusive or possessory. Prior to the passage of the Amendment, the Act defined prospective purchasers as persons who acquired title to the property in question. With the passage of the Amendment, parties with a variety of property interests, such as leasehold tenants, secured lenders, easement holders, and licensees now enjoy the limitation of liability afforded by the Act. Frequently, parties other than the fee simple owner of a property seek to develop the property. Broadening the applicability of the Act may encourage more parties to redevelop brownfield sites in Georgia, and the revised Act may attract large, creditworthy tenants to develop these sites into profitable properties.
Addition of a 30-Day Grace Period
The Amendment further amends the Act to allow prospective purchasers to gain the limitation of liability if the prospective purchaser applies for this benefit within 30 days of acquiring a property interest in the brownfield site and subsequently receives the EPD’s approval. This grants protection to prospective purchasers that cannot perform the necessary due diligence on the brownfield site prior to acquisition of the prospective purchaser’s property interest. Often, the current owner of a property interest will not allow the prospective purchaser to perform the required due diligence on a property because the current owner fears diminishment of the property’s marketability.
Transferability of Limited Liability
The Amendment clarifies the survival of the benefits of the limitation of liability. The limitation of liability for a prospective purchaser will survive a change in that party’s interest in the property. Further, any subsequent party that acquires a property interest in a qualifying property will enjoy the benefits of the limited liability. For example, if a ground lease tenant acquires possessory interest in a qualifying property from a fee simple owner that enjoys the benefits of limited liability, the ground lease tenant will also enjoy the benefits of limited liability. The transferability of limited liability will also benefit parties with security interests in qualifying property. Thus, with the passage of the Amendment, it is clear that a mortgagee that acquires a qualifying property through a foreclosure sale or deed in lieu of foreclosure will automatically enjoy the benefits of limited liability on the qualifying property.
The passage of the Amendment has the potential to attract more developers to clean up brownfield sites throughout Georgia and develop the properties into profitable sites. As competition for core urban sites heats up across markets in Georgia, developers may find that the revised Act provides an attractive redevelopment tool, particularly in light of the ability to recoup certified brownfield cleanup costs by participating in the ad valorem tax abatement.