Why A Phase 1 Site Assessment Before You Purchase Property
Phase 1 site assessment is all about self-protection.
It’s a straight-forward but essential risk management tool that should be completed as part of your due diligence before purchasing commercial or even residential real estate. It’s important enough that Phase 1 site assessments are now frequently required by lenders.
The point is to establish yourself as an “innocent landowner.”
This designation protects you from liability after purchase by demonstrating you had no reason to know the property was contaminated. Failure to achieve this determination puts you at risk for what could be years of very expensive detailed site investigation and remediation involving one or perhaps several federal, state and local environmental protection and public health agencies.
Why set yourself up for all that?
Phase 1 site assessment isn’t particularly costly, but it can take two or three weeks to complete. The research involved is designed to uncover:
- Historical Recognized Environmental Conditions that are already known but which have not been addressed.
- De minimis Conditions, the existence of contamination considered less critical, such as lead paint, asbestos or mold.
- Recognized Environmental Conditions, serious problems that indicate the need for a more extensive Phase 2 site investigation.
Your smartest approach is to hire a professional engineering firm to conduct the Phase 1 site assessment. They know what to do and which details matter, so you can be assured your assessment is complete and accurate, and their recommendations are tailored with your best interests in mind.
Your team will visually inspect the property to look for actual or potential problems regarding storage, handling or disposal of hazardous substances. They’ll research historical ownership and uses of the property, going back as far as possible to uncover any known issues relating to hazardous substances. They’ll also examine the property’s geology and hydrogeology, to identify any surface or subsurface conditions that may indicate contamination of some kind.
Finally, you’ll receive a report of findings and recommendations based on your Phase 1 site assessment. You don’t have to share this information with any official agency, but you can use it to move forward with your real estate purchase, confident you’ll qualify as an innocent landowner.
Or, if contamination is found, you can choose to skip the purchase or negotiate a fair price that reflects the existence of problems and the probable costs of remediation.