In commercial real estate and development, the fate of a project always comes down to the bottom line. A prospective buyer must protect herself from environmental liabilities by making an informed decision prior to purchasing a property. Performing a Phase I Environmental Site Assessment (Phase I ESA) is the standard procedure for evaluating environmental risks associated with a real estate investment. It is one of the first steps to fulfilling due diligence requirements during a commercial real estate transaction. It is ultimately designed to protect a prospective buyer from making a decision that could cost thousands, or even hundreds of thousands of dollars, down the road. Furthermore, a Phase I ESA could potentially allow the prospective buyer to negotiate a purchase price that better reflects the true value of a property based on the environmental risks associated with it.
The scope of a Phase I is governed by the EPA’s All Appropriate Inquiry (AAI) rule, the process of inquiring into the previous ownership and uses of a property “consistent with good commercial or customary practice” in order to meet the requirement of CERCLA’s innocent land owner defense. Without an AAI compliant Phase I ESA a landowner can be held liable for environmental contamination whether they contributed to the contamination or not. The following key elements of a Phase I ESA help an Environmental Professional develop a professional opinion concerning any environmental risks associated with a property:
- Comprehensive historical and regulatory records review to include but not limited to Sanborn Fire Insurance Maps, historical aerial photos and topographical Maps, regulatory database report and title information.
- Geological and physical settings in relation to their impact on the site.
- A preliminary vapor encroachment screening to access any vapor issues from sites identified in the regulatory records review.
- Interviews with key site personnel, tenants and local government officials familiar with the property.
- A site visit to include a visual inspection of the subject property and adjoining properties. This provides a record of any hazardous materials and petroleum products used or stored on site.
- A written report identifying any recognized environmental conditions and summarizing the Environmental Professional’s findings and any conclusions.
Element’s staff has over twenty years of combined experience conducting Phase I ESAs. Our goal is to provide our clients with essential environmental information on a property before they close the deal. We communicate openly with our clients as the process unfolds, ensuring there are no surprises at closing. We have experience with small scale commercial properties as well as large complex industrial and manufacturing sites. We provide sound business advice concerning the environmental liability of a property to our clients so they can make an informed decision before purchasing a commercial property.