knowing the difference between phase i and phase ii environmental site assessments
TRANSCRIPT
Knowing the Difference between Phase I and Phase II Environmental Site Assessments
As concerns about legal liability related to environmental concerns grow, conducting
environmental site assessments has become an important part of due diligence for real estate
transactions. These assessments help prevent harm to parties involved in a real estate transaction,
informing buyers and sellers alike of potential environmental hazards.
Phase I and Phase II environmental site assessments are very useful in establishing whether
environmental contamination liabilities exist on a property being sold. The primary difference
between Phase I and Phase II assessments is rigor. The Phase I assessment uses documents and
interviews to compile information. Phase II assessments go deeper, taking soil and water samples
for analysis.
Phase I Environmental Assessment
Phase I ESAs were developed after the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 went into effect. The act, commonly referred to as CERCLA, set up
guidelines for determining liability regarding environmental contamination of real estate
properties. Under the law, property owners of sites can be held liable for releases of hazardous
substances. Innocent landowners, contiguous property owners and bona fide prospective
purchasers may be exempt from liability, however. A Phase I ESA report can help property
owners establish that they are eligible for these protections.
In a Phase I ESA, evaluators conduct an inspection of the property and review records related to
the property. These records typically include deeds, aerial photographs, surveys, maps, and other
documents. The evaluator may also examine records of other nearby properties, particularly if
there have been concerns about contamination at these properties. Interviews with property
owners in the area and state and federal officials may also be part of the review.
Depending on what the Phase I ESA digs up, a Phase II ESA may be recommended by the
evaluator.
Phase II ESA
Phase II ESAs are far more invasive than Phase I environmental site assessments. In a Phase II
assessment, evaluators may conduct lab tests. A Phase II assessment may include:
Soil samples
Water samples
Well drilling to monitor groundwater
Surveying for underground storage tanks or drums
Sampling of drums on site
Testing of underground tanks
Transformer or capacitor sampling for polychlorinated biphenyls
Based on what environmental consultants find, prospective property owners have several
options. They can walk away from a deal, require that the current landowner remediate the
property as a condition of the sale, ask that the price of the property be reduced to compensate
for remediation costs, or purchase the property and begin remediation on their own. In some
cases, federal grant money may be available to help property owners clean up contaminated
property.
Banks typically require ESAs on property worth more than $1 million. Parties to lower value
transactions would also be well-served to conduct an ESA, as liability resulting from
contamination can be extremely costly if the matter ends up in litigation. For site assessments
conducted by a professional, reliable evaluator, property owners should consider EBI Consulting.
The company has a sterling professional reputation and can provide expert due diligence
consulting tailored to clients’ specific needs.