September 25, 2020

5 Myths of Phase I ESA Reporting

In our work with hundreds of commercial real estate owners, investors, project managers and property managers in the San Francisco Bay Area and beyond, we’ve performed Phase I ESAs for just about every type of property. One thing we’ve encountered is misunderstanding surrounding the report. Check out our guide to 5 Myths of Phase I ESA Reporting.

In this article, we’re going to set the record straight by identifying the 5 most common misunderstandings, or “myths” surrounding Phase I ESA reporting.

Myth: A Phase I ESA is a comprehensive environmental assessment.

Myth debunked: It is not. The Phase I ESA involves a visual inspection and review of all publicly available records about a site and its history to determine if there is a likelihood of contamination on the property. If there is evidence of possible contamination, a more comprehensive Phase II ESA may be required, which often involves sampling and testing of soils, water, and more.

Myth: A Phase I ESA covers everything.

Myth debunked: Not quite. A standard Phase I ESA does not address some serious contaminants such as asbestos, lead-based paint, and mold. These are covered under a separate Hazardous Materials Survey.

Myth: If I get a clean Phase I report, I’m free from any environmental liability.

Myth debunked: Not exactly. A Phase I ESA compliant with ASTM regulations does indeed satisfy the EPA’s requirement that a buyer take “all appropriate actions” to determine if a property is compromised. 

However, the buyer is also responsible for performing a title search for any liens, property use restrictions or any other evidence of environmental issues. 

Myth: Any contamination is a deal-breaker. 

Myth debunked: Not anymore. Regulations were updated in 2013 to make it possible to clear a property with a “recognized environmental condition” for unrestricted use under certain conditions when the contamination is deemed to be sufficiently contained and controlled.

Myth: Any building inspector can perform a Phase I ESA. 

Myth debunked: Not so fast. Environmental due diligence must be performed by an “Environmental Professional” trained under ASTM standards. It is also critical for inspectors to be aware of any state or local site assessment requirements. These requirements are often different from federal ASTM standards. Most authorities recommend hiring an experienced environmental consulting firm. The environmental assessment will be relied on by buyers, sellers, investors, lenders and insurers. The risks are high, and there’s no need to make them higher by using an inexperienced consultant. For more information on who can conduct a Phase II ESA, check out our blog post here

Surprised? We thought so. By the way, Essel Environmental Engineering and Consulting offers environmental services for the full real estate cycle, including disposition, acquisition, property management and real estate development. For more information visit www.esseltek.com or give us a call at 1-800-595-7616.

 
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