Do I need to do a Phase I ESA?

One of our most commonly asked questions is do I need to do a Phase I on the property I am buying? A Phase I is buyer due diligence and is meant to protect a buyer for environmental costs (liability) that can devalue a property.

The question regarding do I need to do a Phase I ESA, is best answered by saying, doing a Phase I is not going to hurt you.

Buyers incorrectly view a Phase I as a needless expense when buying a property they view as low risk.

When we say a Phase I is a good idea, its not to spend your money its to protect you from liability. Case in point here are four properties that were purchased without a Phase I.

Multi unit residential building on tract of land purchased 10 years ago.

Owner looking to sell to developer who is planning on tearing down the structure and building multiple units. Owner didn't do a Phase I when they purchased. Buyer does a Phase I, which leads to a Phase II which finds contamination. Bottom line owner pays $38,000.00 to cleanup site for historic contamination. A Phase I would have found this issue.

Commercial Property purchased 25 years ago, no Phase I performed.

Building is owner occupied for their business which involved doing work at clients properties. Owner selling business and property. Buyer does Phase I, which leads to Phase II, which leads to $89,000.00 of remediation for owner.

Commercial strip center with 5 tenants. Owner bought 10 years ago without doing a Phase I.

Again, buyer does Phase I, which leads to Phase II which leads to a $28,000.00 remediation.

Auto repair shop, former gas station, buyer acquires the property in 2020, with some document stating no environmental issues. Believes there is also insurance policy on the title.

New owner not selling, but rehabbing for a tenant. State environmental agency representative stops by property because the site is out of compliance with regulations. A check of state database confirms the violation status of site (Phase I would have found this out). Current starting costs are $34,000.00.

The common thread on all four properties is that the buyer did not see the need for a Phase I. To be fair the buyer was not an environmental consultant.

As an environmental consultant we see these property fails all the time. You do a Phase I so you don't wind up like the four property owners above.

You need a Phase I ESA to protect your investment.

Environmental testing and cleanup costs thousands if not tens of thousands of dollars. You can also spend hundreds of thousands of dollars. So a Phase I is a money saver and insurance on your purchase, assuming you don't contaminate the land.

A few thousand dollars spent on a Phase I ESA could save you big time.

So do you need a Phase I Environmental Site Assessment (ESA) following ASTM E1527-21.? You can call our office to discuss the matter, we can give you more examples regarding sites that looked free and clear of environmental issues but were not.

Expert Environmental Advice