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February 2, 2016

Why Is A Phase I Environmental Site Assessment So Important?

A Phase I ESA (Phase I ESA) is important because it helps protect your liability.  Especially, when buying commercial real estate.  Whether it’s a vacant land or a property with 10 buildings.  A properly prepared Phase I ESA is a key part of the environmental due diligence process.  Simply put – it helps identify historical or present day concerns related to the subject site.

The Phase I ESA helps identify historical uses that could impact the subject site, even today.  Example of historical uses that can be of concern are dry cleaners, gas stations and types if industrial uses that can leave an environmental impact on a property.  It can be seen as a type of insurance – in case surprises arise after buying the property.  Certain high risk uses can impact the property in a way that contamination can exist 20, 30 or 40 years later.



Does the Phase I ESA protect the buyer?

Without knowing the history of the site, which the Phase I ESA provides, the buyer or lender of the commercial property could be held responsible if contamination is found in the present day.  This can have significant impact on the value of the property, which would impact whoever is lending on the property and using it as collateral.

The Phase I ESA helps the landowner perform their “due diligence” which is a key step in helping qualify for the Innocent Landowner defense.  The innocent landowner defense helps cover the costs of cleanup / remediation if they can prove that the Phase I ESA performed was done based on the ASTM 1527-13 standards.

If a report is submitted that is not compliant – then the purchaser or owner of the site may not qualify for the innocent landowner defense.

Why else is the Phase I ESA report important? 

Another reason that the Phase I ESA is important is because decisions are made based on the report.  Usually, the Phase I ESA is provided to other contractors and consultants to show the history of the site, whether it had any issues, etc.  When other parties read the report – they are relying on the findings to make sure the site is safe for people to either occupy or work in.  Although there are some limitations to what they should do with the Phase I ESA – it provides a good summary of the history of the site.

A Phase 1 Environmental Site Assessment report (Phase 1 ESA or Phase I ESA) is an environmental assessment on a piece of commercial property.  The purpose of the report is typically for real estate transactions such as land purchases, building purchases, leases, business purchases, new residential developments and bank loans for commercial real estate.

Phase 1 ESA reports must be performed in general compliance with American Society for Testing and Materials (ASTM) Standard E-1527-13. This ASTM standard adheres to the Environmental Protection Agency All Appropriate Inquiries Rule, codified into the federal regulations by the EPA (40 CFR Part 312).

The Phase I Environmental Site Assessment (Phase I ESA) performs this due diligence for the environmental condition of a commercial property before it changes hands.  This helps make sure that the collateral (property) that is used for the loan amount does not lose its value due to unforeseen environmental conditions.

Here are some of the other most common questions about Phase I ESA’s:

When Do I Need A Phase I Environmental Site Assessment?

The Phase I ESA  report investigates the environmental conditions of commercial properties and, if no risks are found, frees a new owner from any liability under federal environmental cleanup laws. Called CERCLA or Superfund laws, these are serious regulations and liability impacts can be huge. For that reason, many lenders, insurers, municipalities and regulators require ESA Phase 1 reports for commercial property transactions. This is especially common for properties known to have been used for industrial purposes, that are old enough to predate hazardous materials restrictions, are vacant in an urban area, or are residential complexes that could have been exposed to hazardous materials.

What Does A Phase I Environmental Site Assessment Involve?

A Phase 1 environmental site assessment report is an investigation of a property’s current condition and historical use. Typically, it involves a visual on-site inspection with detailed photography to document conditions, a review of records for information about past ownership and uses, and a review of these uses to determine if any of them would have likely involved hazardous materials. Similar searches are done on nearby properties. Interviews with past and present building occupants, and with owners of neighboring properties are also conducted to validate past uses. An ESA Phase 1 does not typically involve any lab testing of things like paint, soil, air or moisture, though a visual inspection may indicate the presence of hazardous materials.

Am I Done After A Phase I Environmental Site Assessment Is Completed?

That depends in part on the findings, and in part on the requirements for a specific transaction. If a Phase 1 report turns up any evidence of possible contamination, this may trigger a Phase 2 assessment to determine if the possible contamination in fact exists. Also, different lenders and public agencies may require additional due diligence reports. These might include:

  • Hazardous Materials Survey
  • Property Condition Assessment (PCA)
  • Probable Maximum Loss Report:
  • American Land Title Association Survey
  • Soil Testing

How Do I Get A Phase I Environmental Site Assessment?

Most Phase 1 environmental site assessment reports are performed by local environmental engineering consulting firms. Local experience can be important because local planning departments often have specific processes they use, and knowledge of these processes can expedite reporting. The most important thing to think about in performing a Phase 1 report is to get it done right. If there are risks associated with a property, you want to know about them as early as possible. Reach out to us today for additional information on how to begin the Phase 1 ESA process today! Never hesitate to call out main number at Essel Environmental at 1-800-595-7616. We are here for you.