Quality is The Key in Phase I Environmental Assessments
Sophisticated commercial real estate purchasers and their lenders require Phase I environmental site assessments when arranging a property loan, just as they require a title search. Even proper procedure performed at the wrong type of property or in the wrong type of building can create enormous liabilities for a property owner. Meeting all requirements dictated by the final AAI Rule is a threshold step to qualify for CERCLA landowner liability protection. Even without a lien, a lender can become entangled in an environmental dispute through a business loan. For example, if a lender becomes involved in management of a business, the law then considers the lender a material participant in the business and to environmental liability. It is critical that lenders routinely appraise processes at businesses on owned properties through procedures that do not run the risk of being viewed as material involvement
AAI – Phase I Environmental Site Assessments – performed by Realm follow the AAI / ASTM E 1527-13 standards of practice and are more likely to result in discovery of potential problems during the assessment process before purchase, as well as to hold up in court if contamination is found at any time post-purchase.
Phase I ESA Scope:
- Certification that the inquiry into the property and the resulting report was prepared by a qualified “Environmental Professional” with requisite experience in accordance with the final AAI Rule.
- Visual inspections of the property and adjacent properties by the Environmental Professional.
- Interviews with past and present owners, operators, occupants and the prospective purchaser.
- Reviews of historical sources back to the first obvious use of the property.
- Review of government records.
- Commonly known or reasonably ascertainable information, including an evaluation of the purchase price of the property.
- An evaluation of commonly known or reasonably ascertainable information, including the degree of obviousness of the presence of contamination and the ability to detect the presence of such contamination.
- Data gaps, and the significance of those data gaps in the Environmental Professional’s opinion.
- An inquiry by the purchaser of the property for any environmental cleanup liens filed against the property, whether the person has any specialized knowledge or experience, the relationship of the purchase price to the fair market value of the property, if the property was not contaminated, and any commonly known or reasonably ascertainable information about the property.
- All appropriate inquires must be conducted within one year prior to the date on which a person acquires a property. If any inquiry was completed more than 180 days prior to the date of acquisition of the property, certain components, including interviews with past and present owners, operators and occupants, searches for environmental liens, and visual inspections of the property and adjoining properties must be updated within 180 days prior to the acquisition date of the property.
Limited Environmental Due Diligence Products
Not all circumstances require a full Phase I Environmental Site Assessment. If the user is not looking to qualify for CERCLA liability protection, such as many lenders conducting environmental due diligence for loan originations, a tiered environmental due diligence policy utilizing both the Phase I and limited-scope or “desktop” environmental reports can be successful at screening for high environmental risk properties.