A Phase I Environmental Site Assessment (ESA) should be performed under the guidelines of ASTM Method E1527-13 and in compliance with the regulations of U. S. EPA All Appropriate Inquiry (AAI). The Phase I ESA is generally the standard requirement for loans on real estate. The Phase I ESA is also a great idea for cash deals since it minimizes the chance of purchasing a property with significant environmental liabilities that would reduce the property’s value. With most cash deals, the buyer today will be a seller tomorrow or want a loan to finance another deal.
For lower value properties with less risk, the lender may allow for a scope of work less than the EPA AAI/ASTM Phase I ESA. Lenders may allow for a basic environmental regulatory database search (sometimes referred to as an EDR) or a Transaction Screen in accordance with ASTM Method E1528-14. The Transaction Screen includes a number of components similar to the Phase I ESA including the regulatory database search, historical reviews, and Site inspection. The Transaction Screen identifies “potential environmental concerns” rather than Recognized Environmental Concerns (RECs).
The Transaction Screen is a lower cost option to an ESA for properties that have less risk and when the lender is amenable to an assessment less than the Phase I ESA. The Transaction Screen as detailed by ASTM E1528-14 does NOT meet the requirements of the EPA’s AAI and does not offer the user protection from liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 commonly referred to as Superfund. As a note, most properties in the Dallas/Fort Worth area (other than the area around the West Dallas Superfund project at Singleton and Westmoreland) are not on, adjacent to, and/or impacted by CERCLA.
Based on our experience over the last 30 years, we recommend that a Transaction Screen be limited to residential or rural areas, properties with no obvious environmental concerns, little to no development, and lower value. Typically, urban real estate with a longer history of development and surrounding properties such as filling stations and cleaners are not good candidates for the Transaction Screen process. If you have a property in mind, we can perform a quick review of available TCEQ files to determine if your property should be considered for a Transaction Screen.
For more information on how a Transaction Screen might be an option for you, contact Michael Whitehead or myself at Whitehead E. S. at (469) 609-8080.