February 22, 2016

How To Accelerate Environmental Due Diligence Without Sacrificing Quality

You’ve finally agreed to terms for the purchase of a commercial property. Now it’s time to complete all the paperwork–no one’s favorite task. Among the items on the list of required documents is an environmental due diligence report. This sounds complicated, and you have 30 days to close.

The good news:

Environmental due diligence is a relatively standardized process for most commercial real estate transactions. Typically, it involves what is called an Environmental Site Assessment Phase 1 (ESA Phase 1) which, when properly performed and delivered, protects the buyer from any liability for environmental issues on the property. The ESA Phase 1 report looks at a property’s historical use, neighboring property uses, construction materials, current condition and geologic factors and issues a report of its findings. Essentially, it’s looking for any evidence that a property has been exposed to hazardous materials.

Because ESA Phase 1 reporting has become standardized, depending on the size and complexity of the property, reports can be done relatively quickly. In the environmental engineering business, however, speed is relative. Large custom environmental investigations can take months or years. A standardized investigation like a Phase 1 can take several weeks or longer. Here are some ways to expedite the process.

  • Hire an experienced firm. Because Phase 1 reports are somewhat routine, you can find companies that will promise very fast assessment and reporting. Be careful here. The ultimate goal is a clean Phase 1 report that will stand up, if needed, in any dispute. It needs to be done right.
  • Look for local experience. Different municipal entities keep historical records in different departments and locations. Knowing how and where to search building records, planning records, use permits and environmental records can save days, even weeks, in the assessment and reporting processes.  Also, building departments can be finicky. They will pay attention not just to the contents of a Phase 1 report, but to how and when it is submitted. They are all about process, and a firm that is familiar with the people and the processes of a local building or planning department can accelerate approval.
  • Bundle reports. Typically, there are additional environmental due diligence reports required by state and local agencies. You might think that hiring multiple vendors in parallel to perform each report will get them all done faster. Usually, the opposite is true. Because there is often overlap in the data required for various reports, using a single firm to perform all investigations will almost always save time and money.

There are plenty of companies out there offering nearly instant environmental due diligence reporting. Proceed with caution. In our experience, speed and quality don’t have to be mutually exclusive when generating required reports. However, most commercial real estate deals are worth far more than the cost of a professionally performed assessment and coinciding report, and the cost of an incomplete or insufficient report can be devastating. Engaging an experienced, professional environmental engineering firm with proven local experience can help real estate buyers expedite due diligence investigations and reporting, saving time and money in the process.

 

For more, download our free guide to Environmental Due Diligence:

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