By: Javier Vélez Arocho
For decades, the general wisdom is that commercial real estate tends to be a significant investment. But what happens when a property becomes a liability due to unforeseen environmental conditions? Suppose a new owner does not consider assessing the history behind the great price at which a property its been offered in the market. In that case, he/she may be taking a high risk of inheriting a complex environmental liability. Avoiding unanticipated problems is where a Phase 1 Environmental Site Assessment (ESA) comes into play.
When looking for an industrial, agricultural, or commercial property, it is critical to consider learning about the parcel’s past uses. Conducting an environmental due diligence process is a smart step when completing commercial property transactions. It attempts to identify many unforeseen owner liabilities relating to the ecological integrity of the property. A Phase 1 Environmental Site Assessment is the first step in investigating potential unknown environmental liabilities at the property.
Our environmental specialists’ team is ready to help you understand the science behind Environmental Phase 1. Below, we will discuss what you need to know about this process, what it is, and why it is essential.
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A Phase 1 Environmental Site Assessment is an investigation into the current and historical uses of a particular property. It includes the subsurface beneath the property, the physical infrastructure on the property, and the surrounding land uses and conditions.
This assessment focuses on identifying any potential environmental concerns or “Recognized Environmental Conditions” connected with its current and historical use or surrounding properties. Suppose a person purchases a property without first conducting a Phase 1 Environmental Site Assessment. In that case, the purchaser is at risk of being liable for any contamination discovered on the property following the sale and subsequent regulatory actions or mitigation costs.
To be effective, a Phase 1 Environmental Site Assessment, the environmental consultant would follow (ASTM) E 1527‐13 Standards. This document is to conduct an inquiry designed to identify recognized environmental conditions in connection with a property.
How a Phase 1 Environmental Site Assessment Protects Your Business?
Environmental liabilities are one of the most common reasons for incurring unexpected expenses connected with purchasing a commercial property. These unforeseen liabilities can result in business owners not using a retail property for its intended purpose, preventing them from getting back their investments. Usually, cleanup operations of contaminated sites can be expensive and last a long time, sometimes years depending on contamination level. Conducting a Phase 1 Environmental Site Assessment is a smart decision that will protect business owners from this type of liability via the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), otherwise known as the EPA’s Superfund Program.
The Superfund program establishes prohibitions and requirements about closed and abandoned hazardous waste sites; determines who is responsible for handling hazardous waste at these sites; and establishes a trust fund providing cleanup when the EPA can not identify the responsible party for the environmental conditions. The legislation safeguards businesses that meet the USEPA rules. Properties that are labeled “brownfield sites” are subject to CERCLA regulations.
Does bank or lending institutions require a Phase 1 ESA?
Although a Phase 1 Environmental Site Assessment is not mandatory for every commercial real estate transaction, the study will be required by the banks or lending institutions involved in the sale. Each lender performs significant due diligence to protect their investments, so commissioning a Phase 1 Environmental Site Assessments ensures no hidden environmental concerns for lending institutions that could result in substantial cleanup costs later.
What type of property can be the subject of Phase 1 Environmental Site Assessment?
The Phase 1 Environmental Assessment’s focus is on industrial and commercial properties. This type of analysis is the first step in identifying soil and groundwater contamination on a parcel that may impact the subsequently revitalizing activities of this property for commercial use.
In Diatom Environmental Services, LLC, we have summarised the necessary steps to complete the Phase 1 Environmental Assessment. The following guideline will help you understand the basics steps to have a complete environmental document that will reassure the economic development of the property you are purchasing.
Phase 1 ESA Guidelines:
Objective: An Environmental Site Assessment Phase might be performed for various purposes, including identifying past specific incidents on site, probable areas of environmental obligation, designated substances, and baseline study to develop Phase 2 ESA.
Scope: Phase 1 ESA must include a historical review, a site examination, and interviews with people related to the site and controlling bodies, accessible in a comprehensive report. The environmental contractor should recognize any restrictions to the above scope, and the intention behind the limitation should be delivered.
Limitations and Exceptions of Assessments: ESA is based on the data available on various sources and was executed using appropriate techniques. We use an extensive database of archives available with the USEPA, the Puerto Rico Environmental Quality Board, and the EDR® data service to obtain the most accurate information on the parcel being assessed.
Historical Review: Every Phase 1 ESA should provide a sequential summary of events in the area and on-site, from the first development to the present. Sufficient facts of any residential, commercial, or industrial action in the site should be delivered to evaluate potential environmental concerns. The use of historical aerial images is always recommended to identify past uses.
Site Description: The document should describe in detail the existing conditions, especially the topography, stressed vegetation, and stained soil if present, oil pools, unusual odors during the site visit, the presence of 55-gallon drums with unknown liquids or materials, debris, trash and abandoned vehicles or heavy equipment.
Interviews: The ASTM regulation requires conducting interviews of personnel familiar with the parcel’s existing operations or history, giving the interviewer a better understanding of what happened in that place over the years.
Photo record: It is vital to develop a photo record to compare existing conditions with other historical data.
Conclusion and Opinions: This section summarizes the results and the findings offered by the environmental contractor. Once you have completed the above-referenced steps, your consultant will be ready for a final report and certification.
Would you like more information on Phase 1 Environmental Site Assessments?
Finding a knowledgeable and responsible company to perform your Phase 1 Environmental Site Assessment is vital for your protection. It minimizes your liability and potentially saves you from costly cleanup costs related to past releases at the property. A reliable consulting firm will determine if a standard Phase 1 Environmental Site Assessment is needed or if the existing conditions grant a more customized work scope like an Environmental Phase II is required to investigate potential environmental concerns.
