Do you manage, purchase, sell or invest in commercial real estate? Have you ever thought to ask yourself, “What is my tolerance for environmental risk?” Buying any type of real estate presents some type of risk, but when purchasing commercial or industrial property, it can become an increasingly important aspect to consider.
There are many different types of real estate buyers: those who have no experience, those with some experience, and those who are very familiar with environmentally impacted properties. “Risk tolerant” buyers have navigated the remedial waters of impacted properties. They understand the types of issues (and costs) that might arise. In addition, their past experiences have taught them to plan for the potential impact on time schedules for activities such as construction, permitting, acquisition, or resale. On the other hand, for some potential buyers, this is their first foray into real estate that may not be completely “clean.” Still, there are other buyers who have dipped their toes, but may not have experienced the complete gamut of environmental issues which may arise. For example, a small shopping center that formerly had a dry-cleaning store may encounter different issues then the potential environmental complexities of a former manufactured gas plant (MGP). Other examples of these properties could include industrial sites, old corner gasoline stations, manufacturing sites and/or coal ash incinerators among many others.
It is important to keep in mind that any property—even an unsuspecting cornfield or a residential lot—could have a hidden environmental liability unbeknownst to the new purchaser. This is why government regulations and industry guidance were set in place. While these laws help protect an “innocent landowner” from environmental pollution on their newly purchased real estate, the buyer still needs to perform due diligence prior to the transaction.
Testing Before Purchasing
A Phase I Environmental Site Assessment is a required step to evaluate the level of environmental risk a purchaser may be exposed to and is necessary for a commercial real estate transaction (and perhaps other types of real estate as well). It is a process established and outlined by the American Society for Testing and Materials (ASTM) Standard Practice for Environmental Site Assessments (ASTM designation E 1527-13). Consisting of several phases including site inspections, review of public records, and interviews; the Phase I aims to develop an opinion on potential environmental liabilities for a property. In ASTM terminology, these potential liabilities are referred to as “Recognized Environmental Conditions.” It should be noted that a Phase I assessment is not an exhaustive examination, instead, it’s inherently limited. Conclusions are drawn and recommendations are developed from information obtained from desktop research and limited site evaluations. A Phase I assessment cannot wholly eliminate uncertainty regarding the potential for Recognized Environmental Conditions in connection with a property. Consequently, a Phase I Environmental Site Assessment is intended to reduce, but not eliminate uncertainty regarding the potential for environmental liabilities.
Seek Professional Guidance
For over 30 years, we have assisted a variety of clients with all types of environmental matters. Our portfolio includes Fortune 500 firms to attorneys, industrial facilities, and contractors. Simply put—we’ve seen it all.
We provide the expertise and first-hand knowledge needed to manage environmental compliance issues including spills and contaminants on commercial, industrial, or residential properties. If your business is affected by environmental regulations and you’re unsure how to move forward, we can help. Contact us today for a no-charge consultation and learn what our team can do for you.