Have you been told that you need a Phase I ESA, but aren’t sure what it is or where to start? More than likely, you are being required to perform a Phase 1 Environmental Site Assessment (Phase 1 ESA) as a part of a commercial real estate transaction. Typically, the party that is providing the financing for the property requires the Phase 1 ESA to ensure there aren’t any environmental liabilities associated with the property being purchased.
Based on federal law (CERCLA) – the present property owner can be held liable for historical contamination on a property, even if the current owner did not own the property long enough to be the cause of the contamination.
What is a Phase 1 ESA ?
A Phase 1 Environmental Site Assessment (Phase 1 ESA) is an environmental report that documents and reviews the history of a property in a real estate transaction where a change of property ownership occurs. The review is to identify potential high risk uses that would identify a “recognized environmental condition” or a REC. The main purpose of the Phase 1 ESA is identify if there is a REC associated with the property.
A Phase 1 ESA can be conducted on all types of property, including residential, commercial, industrial, or agricultural properties. They can even be conducted on undeveloped land. Usually, any type of commercial loan (real estate with greater than 4 units) will require a Phase 1 ESA.
The report, conducted by an environmental professional, examines the history of the site down to its earliest available records. In a Phase 1 ESA, the firm conducting the examination is looking for any “high-risk uses” of the property or adjacent properties that might contribute to a REC, or recognized environmental condition, on the property in question in the past or present.
Some common “high-risk uses” of a property include:
- The property, or an adjacent property, was previously used as a gas station, service station, or repair shop of any kind that has contamination on the site
- The property was used as a junkyard, metal shop, or automobile salvage.
- The property or immediately adjacent property used to be a dry cleaner’s for any number of years.
- The site was a farm and currently vacant
The possibility of a REC on the property could warrant further testing of soil and groundwater for contamination, often referred to as a Phase II Environmental Site Assessment (Phase II ESA) or a soil vapor test.
Check out our YouTube video on Phase 1 Environmental Site Assessments: Phase 1 ESA Video
There are many different types of RECs that vary in levels of complexity and importance. The most common RECs are related to abandoned oil wells, leaky underground storage tanks (USTs), residual dry cleaning chemicals, or improperly disposed of or stored chemical waste.
An important thing to note about a Phase 1 ESA is that no sampling is conducted on the property at this time. A Phase 1 ESA is a visual inspection of the property where engineers comb through records, conduct a site visit, and talk to former property owners, the owners of adjacent properties, and relevant others. As previously mentioned, a Phase 1 ESA determines if further testing needs to be performed on the property.