Phase I Environmetal Site Assessments
In
commercial real estate transactions one line item required by a lending
institution is a Phase I Environmental Site Assessment. To most
agents and buyers, a Phase I ESA is simply another line item that needs
to be completed in order to fund the transaction. Others believe
that a favorable Phase I report is a complete environmental "clean bill
of health." In reality, a Phase I ESA is more than, and less than,
either extreme.
The purpose of a Phase I report is to identify "Recognized
Environmental Conditions" (RECs) on a subject property. Identified
RECs shield the buyer from any environmental agency litigation to clean
up what previous owners or adjacent landlowners left behind. The
primary reason for requiring a Phase I is to provide the "innocent
landowner defense" concerning environmental issues on the property.
A properly performed Phase I is the result of site visits, records
reviews, and interviews with property owners and governmental officials
to determine current and past uses of the property and neighboring
properties. The reporting standards are established by the
Environmental Protection Agency and rely primarily on a procedure
developed by the American Society for Testing and Materials (ASTM) in
Standard E1527-05.
The most common sources of contamination include above-ground and
underground storage tanks (i.e. gas stations and home heating fuel),
chemical storage and/or spills (dry cleaners), or heavy pesticide use
(farms/orchards). But there are many potentially hazardous
conditions which do not fall within the scope of a Phase I. These
conditions include: asbestos, lead-based paint, lead in drinking water,
mold, radon, and mercury poisoning.
A "clean" Phase I report does not necessarily mean there are no
environmental conditions affecting the property. The report is
merely the opinion of the Environmental Professional (EP) who as performed a reasonable
investigation of the property. Any actual recommendations
concerning the environmental conditions affecting the property are
beyond the scope of the report. It is always best to work with a
qualified and experienced EP when a Phase I ESA is required in your real
estate transaction.
Many
thanks to Dan March, M.S. EnEng. (Pisgah Environmental Services
(www.pisgah-air.com)) and Steve Hornaday, Phase I contractor
(hornaday@mindspring.com) for guest writing our Legal Moment this month.
Do
not hesitate to contact me to receive more information on this topic or
to suggest topics for future editions of 'A Legal Moment'. You may not
rely on this content as legal advice for any specific situation, but
should instead contact an attorney for specific advice. | 
