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Phase I & II for Leased Spaces

May 14, 2024 8:38:00 AM / by David C Sulock

If you lease a commercial space, be concerned that you need a baseline of environmental conditions of the property, to avoid future liability.  Although your operations at the site may be innocuous, if contamination is found at the site after you vacate or as you are planning to vacate, the blame can be placed on you.  Think about it what data do you have that would prove otherwise and by data I mean testing.


Phase I & II for Leased Spaces


This client called our office regarding a commercial space they were looking at leasing:

I am a bit afraid of getting involved with leasing this space.  What is the implication for us as the users if a big environmental issue exists?  

If you have not defined an environmental issue BEFORE you lease a space, you can be pulled into being responsible for the contamination.    Think of yourself as being guilty and having to prove your innocence.  The major big box stores and corporate tenants will do their own environmental investigation of a site before they occupy and yes, this investigation will include soil and groundwater testing.    Deep pocket companies do not want to be pulled into a cleanup that were not associated with and to do that you must baseline the environmental conditions prior to occupancy.

A Phase I and II is designed to establish a baseline of what potential contamination is on a site so that you as the purchaser or lessee do not get hit for a cleanup for something that you did not contribute to.  What if the owner did environmental testing after your lease was done and you moved out and found a significant impact on soil and groundwater?  What evidence would you have to prove that you did not cause that contamination?  A Phase I would have identified potential areas of concern, AOC’s, where contamination may be present.  The Phase II would have confirmed it, both of which would provide you liability protection if it was performed.  The Phase II/Site Investigation (SI) work collects samples to confirm if contamination exists.     Some property owners may or may not agree to have the work done, but most owners will allow you to environmentally baseline a property.  

Read your lease, many have clauses pulling a tenant into being responsible for contamination found on the site, and these clauses do not specify when it occurred or from what.  I have had banks occupy properties as branches and be pulled into cleanup that had no real connected responsivity.

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David C Sulock

Written by David C Sulock

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