Phase 1 Investigations

The Phase I ESA is generally considered the first step in the process of environmental due diligence. Due Diligence is required to protect the lender and their client from potential liability associated with the acquisition of contaminated property.

Don’t be fooled. It is not just industrial properties that may pose a risk, but often the most overlooked and common contaminant source involves petroleum releases from heating oil underground storage tanks on older residential lots.

Standards for performing a Phase I site assessment are now governed by the US EPA and are based in part on ASTM in Standard E1527-13. Both standards clearly define how the assessment should be performed in order to allow the purchaser to qualify as an innocent land owner.

In 1998 the necessity of performing a Phase I ESA was underscored by congressional action in passing the Superfund Cleanup Acceleration Act of 1998. This act requires purchasers of commercial property to perform a Phase I study meeting the specific standard of ASTM E1527: Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.

The most recent standard is "Standards and Practices for All Appropriate Inquiries" 40 Code of Federal Regulations, Section 312 and ASTM E1527-13. Both guidances are very similar and have collectively become known in the industry as 'All Appropriate Inquiry' (AAI).

A variety of actions can cause a Phase I study to be performed for a commercial property, the most common being:

  • Purchase of real property
  • A new lender providing a loan on the real estate.
  • Partnership buyout or principal redistribution of ownership.
  • Property transferred by Will
  • Property purchased at auction
  • Divestiture of properties
  • Required by regulatory authority

The Phase 1 reports identify “recognized environmental conditions” which are risk factors that could affect the quality of the soil or groundwater beneath the site and the likelihood of contamination which could require mitigation or clean up. Currently the “shelf life” of an assessment” is 180-days and we recommend a new assessment is performed thereafter.

Phase 1 Investigations

Phase 1 Investigations