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Previously, under phase 1 of Environmental Site Assessment (ESA), we have been using the E1527-13 standard for defining good commercial and customary practice in the USA for conducting an environmental site assessment for the real estate industry.
However, approaches need to change concerning the current guidelines due to different needs. On November 1, 2021, the ASTM committee approved a new standard for conducting phase 1 environmental site assessments.
Comparison of ASTM E1527-21 & 1527-13 Standards
The most vital modifications made to the new E1527-21 standard include the following:
The Phase I process was previously separated into four parts by the ASTM E1527-13 Standard. They included:
- An environmental regulatory review (e.g., federal Superfund site lists/Solid Waste landfill site lists/leaking UST lists) and ASTM Standard Historical and Physical Setting Sources (e.g., historical aerial photographs/historical city directories/topographic maps).
- A site survey.
- Interviews with the site owner, tenants, and others.
- The Phase I ESA Report.
The interviews are now classified and organized into one of the ASTM Standard Historical Sources of the information under the new ASTM E1527-21 Standard.
Use of Historical Standards Additional Sources
The revised ASTM E1527-21 Standard emphasizes the importance of including as much precise information on the usage of the subject property as possible in the Phase I ESA Report.
The EPA, for example, informed the ASTM Committee that many of the most extensively contaminated properties in the United States are old dry-cleaning plant sites.
Such sites are frequently found in a retail usage area, which is not considered to be a source of contamination in the same way that an industrial or manufacturing site would be.
Even though the subject property’s general use is defined as retail, the new E1527-21 Standard mandates that additional ASTM Standard Historical Sources be considered if they are reasonably ascertainable and likely to identify a more particular use.
“Subject Property” Consistent Term Use
Many environmental consultants use various words to characterize the property that is the subject of Phase I ESA in their Phase I Reports.
The terms “property,” “site,” or “subject property” are frequently used interchangeably in the Phase I ESA Report. The reader of the Phase I Report may become confused due to this.
The revised E1527-21 Standard promotes the phrase “subject property” throughout the Phase I Report when referring to the report’s topic property to enhance clarity and consistency.
Shelf Life of an E1527-21 Phase 1 Report
According to the new E1527-21 Standard, the Phase I Report will be valid for up to one year if it was completed no more than 180 days before the acquisition date, or if five specific components of the report got updated (the five components include: interviews, searches for recorded environmental cleanup liens, review of government records, a site survey of the subject property and the Environmental Professional [EP] Declaration).
In addition, the revised E1527-21 standard mandates that the dates on which each of the components is completed be included in the Phase I Report and that the 180-day or one-year time period begins with the completion of the first of these components.
Significant Data Gap
The Phase I ESA Report identified significant informative or observational-related data gaps under the earlier E1527-13 standard. (Note that the E1527-21 standard defines a “data gap” as “a lack or inability to access information required by this practice despite good faith efforts by the environmental professional to get such information.”
However, environmental consultants are frequently perplexed about what constitutes a data gap substantial enough to jeopardize meeting the ASTM Phase I ESA’s objectives.
The new E1527-21 Standard now contains a description of a “substantial data gap,” which is defined as “a data gap that impairs the environmental professional’s ability to identify a recognized environmental state.”
A building on a subject property that is inaccessible during the site survey. According to the EP’s experience, such a building involves actions that can lead to RECs, an example of a substantial data gap.
Furthermore, the new E1527-21 Standard necessitates an explanation of how severe data gaps influenced the EP’s capacity to make REC-related decisions.
Inclusion of Photographs/Maps
While it may appear to most that images of the subject property and a map depicting the subject property’s borders should be included as a standard part of a Phase I ESA Report, the old ASTM E1527-13 Standard did not expressly say that such items should be included.
Surprisingly, the ASTM Committee that produced the revised E1527-21 Standard recognized that such items were not always included in Phase I ESA Reports.
All Phase I ESA Reports must consist of images and a subject property map demonstrating the subject property’s borders, according to the new E1527-21 Standard.
Major site features and areas on the subject property that are regarded as RECs, as well as de minimis circumstances, should be photographed.
(Note: the E1527-21 standard defines “de minimis conditions” as those “associated with a discharge that typically does not pose a harm to human health or the environment and that, if brought to the notice of appropriate governmental agencies, would not be the subject of an enforcement action.”)
How ASTM E1527-21 Standard Can Update a Commercial Real Estate Transaction
The new standard provides that the Phase I Report must contain sufficient information to enable the purchaser to determine whether the subject property has any RECs.
If there are no RECs, the purchaser need not conduct further investigation. If there are RECs, then the Phase I Report must provide sufficient information for the purchaser to evaluate the risk associated with each REC.
This includes identifying the nature of the REC, its location, the potential impact of the REC, and the likelihood that the REC will be remediated. In addition, the Phase I Report must include sufficient information to enable the buyer to decide whether to proceed with the transaction.
If the seller wants to avoid having a Phase I Report prepared, they can sign a statement acknowledging that the subject property has no RECs. The seller also can agree to pay for the cost of preparing a Phase I Report.
If the seller agrees to prepare a Phase I Report, the buyer can request that the seller submit the report before closing. If the buyer requests a Phase I Report, the seller must comply with the requirements of the new E1527 standard.
After reviewing the Phase I Report, the purchaser can ask the seller to perform additional investigations at their expense if the purchaser decides to proceed with the purchase.
For example, the purchaser could require the seller to conduct soil borings, groundwater monitoring, and other tests.
Alternatively, the purchaser may hire an independent consultant to complete these tasks. These activities are considered “additional due diligence.”
For more ASTM Phase 1 information, contact us.