Environmental Site Assessment (Phase I/II)

Service description

An environmental site assessment checks a commercial property for contamination before you buy, lease or lend against it. A Phase I is a records review, site visit and interviews, written up by a qualified environmental professional. If it flags a concern, a Phase II tests soil, groundwater or building materials to confirm what is present and how much.

Common industries

Applies to buyers, lenders and owners of commercial, industrial or development property.

ROI

Protects you from inheriting expensive contamination liability and satisfies lender requirements; a gating step in real-estate deals.

Benefit

Assess a commercial property for environmental risk — a Phase I (and, if flagged, Phase II) — usually required by lenders before a deal closes.

Why get it

Federal cleanup law can make a current owner or operator pay for contamination it did not cause. Assessing a property before acquiring it is how a buyer builds the case for the liability protections the law offers, and lenders usually ask for it.

When you benefit

Done once, before an acquisition, loan or lease. Federal rules require the inquiry within one year before acquisition, with key components within 180 days.

What it costs

Typically a project fee.

When you pay

Providers usually quote a fixed fee for a Phase I, set by the property's size, use and history. A Phase II is priced separately, because its scope depends on what the Phase I finds and how much sampling is needed. Laboratory analysis is often billed on top.

Other costs

Laboratory analysis, drilling or sampling subcontractors, a legal review of the report, and cleanup costs if contamination is found.

Risks to know

Federal law ties liability protection to doing the inquiry properly and in time, so a report that is out of date or does not meet the standard may not protect the buyer. A Phase I can also miss conditions that only sampling would reveal. A Phase II can turn up contamination that changes the price, the deal or the lender's terms.

When risks arise

Findings arrive before closing, which is when they are cheapest to act on. If the report is out of date at closing, the protection it was meant to support may be lost. Contamination missed here tends to surface later, as a cleanup demand or a dispute with a lender or buyer.

The process

The provider reviews historical records, regulatory databases and prior reports, inspects the site and interviews owners and occupants. An environmental professional writes the Phase I report. If it identifies a recognized concern, the business can commission a Phase II, in which the provider samples soil, groundwater or materials and reports the results.

Your commitment

The business gives the provider the property address, ownership and use history, and any earlier environmental reports or permits. It arranges site access and names someone who knows the property's past operations for interviews. It decides quickly whether to commission a Phase II when one is recommended.

Documents to gather

• Property address, parcel number and legal description
• Prior environmental reports, permits or regulatory correspondence
• Historical ownership and use records, including past tenants
• Site plan and any inventory of tanks or hazardous materials

Helpful reading

• Brownfields All Appropriate Inquiries — U.S. Environmental Protection Agency
• Superfund: CERCLA Overview — U.S. Environmental Protection Agency
• Brownfields and Land Revitalization — U.S. Environmental Protection Agency

Further research

• 40 CFR § 312.20 — All appropriate inquiries, including timing and the environmental professional's role (federal)
• 40 CFR § 312.11 — References: industry standards that may be used to meet the inquiry requirements (federal)
• 42 U.S.C. § 9601 — CERCLA definitions, including the all-appropriate-inquiries condition for innocent landowners (federal)
• 42 U.S.C. § 9607 — CERCLA liability of owners and operators for cleanup costs (federal)