Is a Phase I required by law in a real estate transaction?
No it is not required by law. A Phase I is meant to protect the purchaser from environmental liability, as any environmental issue found will reduce the value of the land.
The bank is not requiring a Phase I so I don’t need one?
Again a Phase I is for the buyers protection, banks are not responsible for contamination found on a property where they hold a mortgage. Banks are not so much concerned about a Phase I being performed but that a borrower has the ability to repay the loan.
A Phase I is expensive and not needed.
Most Phase I’s cost under $2,000.00, less than a flood insurance policy at the beach. We tell clients to look at a Phase I costs as a one-time insurance policy premium to ensure you not buying someone else’s problem.
I am getting different prices to complete a Phase I, why is some companies more expensive or they doing it different?
All Phase I's follow a protocol ASTM E1527-13, which outlines how a Phase I is performed. The 13, indicates the year when the protocol was last revised. So on a level playing field everyone should follow the same recipe. Your differentiation is WHO is performing the Phase I. Veteran or more experienced environmental professionals will typically provide a better product based on their foundation of performing many Phase I's over the years, which can account for price differentials. Bottom line you should ask the experience level of the company personnel that performs the Phase I.
The Phase I was reasonable, but it found issues that need to be investigated. The cost for the Phase II is thousands of dollars, why?
Well depending on what the Phase I found, i.e., what issues would require investigation (more issues, more cost) dictates the cost. Additionally many firms that perform Phase I's are staffed by white collar professionals who out source part of the Phase II cost such as drilling, GPR (Ground Penetrating Radar). These subcontractor markup's add to a Phase II cost. Additionally many firms view Phase I's as a loss leader and expect to make up profit margins on the Phase II.
The property is low risk i.e., residential, car wash, store or vacant so I don't think an environmental audit is needed?
We have found residential properties that were once commercial and had environmental problems. Unless you are an experienced environmental professional you are not qualified to render an opinion. We have found current property uses are not the same as past uses. Car washes and stores have been found to had been gasoline stations. An environmental professional would only lend an opinion after a Phase I is completed.
The owner of the property didn’t perform a Phase I, so why should I?
Because you shouldn’t make the same mistake as the previous buyer. What happens when you sell and the new buyer has a Phase I and finds a problem that predates your ownership but you are responsible to cleanup? Besides complain, you will pay for to fix the problem or take a significantly lower asking price for the site.
The number one compliant we hear about a Phase I is from a seller saying they wished they performed a Phase I before they bought the property. This is typically said when the buyer has a phase I completed and find a problem the property owner didn’t know existed.
Who pays for the Phase I?
Typically the buyer, but sometimes the seller and buyer will split the cost. In these arrangement, if the buyer backs out, the seller still retains the rights to use the Phase I for another buyer.
I am selling my property, the buyer did a Phase I. Issues were found and they backed out of the sale. The buyer will not give me a copy of the Phase I, am I entitled to a copy since I am the owner?
If you did not pay for the Phase I, you do not own the report. Many people who pay for a Phase I and do not buy the property tend not to want to share the Phase I with the owner.
I am selling my property, should I do a Phase I?
Aside from the outlay for the cost of the Phase I, there is little downside to the owner performing a Phase I and the upside is very large. When an owner performs a Phase I they have the opportunity to address any environmental issue BEFORE a buyer is found. Some people also use a Phase I as a marketing piece for the property.
About the Author
Curren Environmental is a professional environmental consulting & contracting company that provides turnkey solutions for a broad spectrum of environmental issues. Curren performs Phase I's and Phase II's and Phase III,(drilling, sampling Ground Penetrating Radar Surveys and remediation.) By performing these services in house clients realize cost saving of not having to deal with subcontractor markups.
Curren’s experience in tank removals, tank locating, subsurface evaluations, field sampling, and site investigations and remedial activities has allowed us to provide quality services for over two decades. Our philosophy of hands-on management of environmentally sensitive issues has helped establish Curren as a recognized and trusted name for professional environmental services.