Phase I Environmental Site Assessments

Phase I Environmental Site Assessment

Lougheed Consultants specializes in Phase I Environmental Site Assessments (ESAs) in accordance with the most recent guidelines of the American Society for Testing Materials (ASTM) Practice E 1527 and the U.S. Environmental Protection Agency (U.S. EPA) Standards and Practices for All Appropriate Inquiries (AAI). These standards establish site assessment practices that satisfy due diligence responsibilities for those involved in commercial real estate transactions and provide the basis for the innocent landowner defense as provided under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

Our Phase I ESAs consist of comprehensive and thorough reviews designed to provide appropriate inquiry into the recognized environmental conditions (RECs) associated with a site. A typical Phase I report will summarize our observations and findings, identify potential environmental liabilities associated with the site, and provide recommendations regarding additional actions deemed appropriate to address the identified RECs.

Lougheed Consulting has been conducting Phase I ESAs and site characterization investigations since 1977. Many of these projects have been performed under strict deadlines. We routinely work jointly with attorneys and their legal staff providing guidance on engineering/environmental issues and assisting with the development of buyer/seller agreements. Allow our staff of experienced Environmental Professionals to assist you with your next real estate transaction.

Within 48 hours following the Phase I Environmental Site Assessment, the environmental engineer will provide the you with an accurate, easy-to-read professional Phase I ESA report outlining the findings and presenting recommendations with the degree of urgency. The report will have annotated digital images to facilitate easy communication and guidance to the areas of concern.

In addition to Phase I ESAs, we provide both Property Condition Assessments (PCAs) and Commercial Building Inspections (CBIs). Each has a specific purpose. A Commercial Building Inspection is typically ordered when the buyer of a property wants to determine the condition of a property to discover any hidden costs associated with the purchase. A PCA is often ordered to satisfy the minimal standards of a lender or insurance company.

Why is a Phase I ESA Needed When Buying a Commercial Property?

Who requires a Phase I ESA?

Traditionally, a Phase I was contracted by the bank or lending institution on properties where financing was being arranged. The Phase I assessment was primarily performed for the protection of the banks, who were concerned that if they loaned money for a contaminated property they may be held liable for the site cleanup. Today, many banks with loans under a million dollars and borrowers supplying a down payment do not require a Phase I. This has been an industry shift over the past several years as banks have come to understand where their limit of liability stands.

What is included in a Phase I ESA?

The Phase I ESA is a property assessment that includes a walkover of the property and associated structures; a review of historic property information including maps, aerial photographs, deeds, telephone or address directories, etc.; a review of contaminated properties in the vicinity of the subject property; a summary of knowledgeable party information and review of prior reports; and the review of local, State and Federal files pertaining to the property address.

Items evaluated in the Phase I ESA report include tanks, drains, pits, spills, in-ground and aboveground equipment, petroleum and chemical use, and environmental liens.

Additional issues which may be included in the Phase I ESA at the lenders or clients request include wetlands, radon, asbestos, lead-based paint, and drinking water.

The Phase I ESA report is typically research only. Unless otherwise specified as part of the scope of work, testing or surveys are outside of the typical Phase I requirements.

Why complete a Phase I ESA if my bank does not require one?

Although many banks are not requiring a Phase I ESA on some commercial loans, the environmental regulations leave the burden of environmental responsibility on the property owner. Performing a Phase I ESA, allows a purchaser to complete the necessary due diligence. It is this due diligence that enables a purchaser to obtain prior to taking possession of a property. Buyer beware is relevant now more than ever in commercial real estate transactions.

If a property is purchased without a due diligence evaluation and subsequent environmental issues are found in association with the property, the property owner is now burdened with the cost of remediating the issue. The performance of a pre-purchase Phase I ESA could alleviate the potential for finding environmental issues in the future and thereby holding up future transactions.

As a potential purchaser, the determination of environmental issues on a property could be used as leverage for the seller to remediate the concern prior to purchase or could be used to negotiate the property value pending the need for the potential purchaser to perform the cleanup.

If I don’t do a Phase I ESA and buy a property how would I ever find out if there was an environmental problem with the site?

The most common way is when you go to sell and the potential buyer completes a Phase I ESA and discovers an environmental Area of Concern (AOC). Today the largest purchaser of Phase I ESA’s is not the banks, but commercial real estate investors and owners.

I own a property, never had a Phase I ESA and I am now thinking of selling the property. Do property owners have Phase I ESA’s performed?

One of the largest shifts in the commercial real estate market today is that many landowners are having a Phase I ESA performed to root out environmental issues before they become an issue when a buyer is found. A buyer performed Phase I ESA is viewed as both a marketing tool and an environmental property assessment that can help sellers anticipate issues with a property. It can be akin to a homeowner having a home inspection completed to address issues that a purchaser might find during their inspection.

If an environmental issue is found in a Phase I ESA report on a property I am buying, can I still purchase the property?

If the issue is fully disclosed to the lender (if one is involved) and the buyer is willing to accept the liability and cost of addressing the issue, then yes you can buy the property. But the real question is should I address the issue before buying the property?

The investigation of potential issues found in Phase I ESA is typically addressed as part of a Phase II Environmental Site Assessment.

Beware of low-cost or partial assessments offered by others;
You could be throwing your money down the drain with undetected issues or problems.

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    600 E. Carmel Drive, Suite 168, Carmel, IN 46032

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