The Phase I ESA includes a review of general information such as soil, geology, topography, etc., available environmental records such as state and federal regulatory database files, historical information such as fire insurance maps and aerial photographs, inspection of the site and surrounding properties, interviews with key persons, and development of a report. The scope of work is outlined under the guidelines of ASTM 1527E-13 and follows the rules of U. S. Environmental Protection Agency (EPA) All Appropriate Inquiry (AAI).
The ESA does NOT include an inspection for asbestos, lead-based paint (LBP), wetlands, environmental compliance issues such as storm water, and sampling of soil, groundwater or soil gas unless specifically requested by the user. These task items can be included upon request and should be included in the contract or work order.
In most cases, the Phase I ESA is requested by your lender. A Phase I ESA may not be required in low value, low risk real estate deals such as undeveloped properties worth less than specific value (varies by lender). In these cases, the lender my request an environmental database review and summary or completion of a questionnaire. From the lender’s perspective, the ESA is to minimize their liability and assess potential risk.
A Phase I ESA is a good idea on cash deals or the lender doesn’t require it. When you buy a property you also buy the environmental liabilities. The ESA ensures that you’re not getting unseen environmental problems that cost money and time and ultimately reduce the future value of your property. Remember, the buyer today is often the seller tomorrow!
For moderate to high risk properties, the Phase I ESA is a great idea. For low risk properties (rural and undeveloped suburban properties), a Phase I ESA may not be needed. If uncertain, please call us to discuss.
Yes, because the sooner you know your property’s environmental problems, the sooner you can minimize or fix them. It is our experience that environmental unknowns result in buyer reluctance and potential price reductions. If these issues are worked out prior to selling, the better the deal goes. Lastly, many buyers have access to an environmental consultant and consultants can vary significantly in their evaluations. Any unknowns or suspected contamination will probably be used by the buyer as a bargaining tool. The fewer the unknowns, the quicker the negotiation and the quicker the sale.
The code word in an ESA for potential environmental problems is “Recognized Environmental Conditions” or REC. The REC indicates that additional file review and/or sampling (e. g., Phase II Investigation) may be needed to determine if there is or is not an environmental problem at your property.
Well, it depends. In most cases, the purchase may be delayed until the lender is satisfied that the environmental issue is resolved. In Texas, lenders usually request a “No Further Action” letter or Certificate of Completion from the Texas Commission on Environmental Quality (TCEQ). In other cases, the lender may only require a letter from the consultant, application to the appropriate TCEQ program, and sufficient money in escrow to resolve the environmental matter at a later time. The escrow option is used in these cases because closure and issuance of the No Further Action letter takes time.
The State of Texas has some excellent program to deal with contaminated properties. These programs include:
A Phase II assessment is only necessary if the results of a Phase I assessment indicate conditions are present that require additional testing or sampling. If an environmental consultant concludes during a Phase I audit that no additional evaluation is required, then there’s no need to order a Phase II assessment.
Traditionally, Phase 1’s were ordered by lenders to protect them from being held liable for future site cleanups. Today, liability has shifted to property owners – so it’s your responsibility to assess the risk potential of the land and structures you’re buying. Historical research is the first step in assessing conditions the seller hasn’t disclosed or isn’t even aware of.
In some cases, ruling out contamination also requires testing or sampling from adjacent properties.
The primary components are sampling and laboratory analysis to confirm or rule out the presence of hazardous materials. Some of the tests that may be performed on your property and on adjacent properties:
A trained and experienced environmental professional will conduct the testing following local, state and federal regulations.
Options include requiring the current property owner to clean up the site prior to sale or reducing the cost of the property commensurate with the cost of remediation.
Remember – the buyer and seller do not determine the clean-up standards that must be met. Rather, you must meet the regulations that pertain to your situation. A qualified environmental consultant can advise you during the clean-up process.
Whitehead Environmental Solutions (Whitehead E. S.), is a Plano, Texas based consulting firm that specializes in environmental due diligence services for Texas properties.
