What is Environmental Due Diligence for a Commercial Property?

If you need assistance with environmental due diligence for a commercial property as discussed in this article call us at 1-800-344-4414 or email us at info@atlenv.com for details and a free estimate.

 

Written by Robert E. Sheriff, MS, CIH, CSP, President

April 10, 2017

 

Anyone—personal or business—has a right to know if there are liabilities affecting a commercial property where they have responsibility. This may be of concern to a buyer, a financial entity, a renter/lessor, or even an existing property owner.

DUE DILIGENCE is the process of gathering information on a commercial property to make the interested party aware of anything that can adversely affect the value of the property, present or future liabilities, or anything that could adversely affect the occupants of the property.

Most often the liabilities involve present or past contamination that is not generally known by actual observation. These liabilities can include present problems as asbestos in buildings, pesticides from present or past agriculture, underground storage tanks, (especially leaking ones), past spills, industrial activities that may contaminate soil or groundwater, or contamination from adjacent activity such as gas stations, landfills, chemical plants, dry cleaners, even domestic waste sources (such as septic tanks). How far do you have to investigate by due diligence to relieve yourself of liabilities due to the activities of others?

Fortunately, there is an established method of investigation. This due diligence assessment is called a Phase I Environmental Site Assessment (ESA) which must follow the requirements in ASTM Standard E-1527-2013. This is a very specific method established by The American Society of Testing and Materials (ASTM). It states the minimum qualifications of the Assessor and the exact process of satisfying the information, gathering process, and the final report to satisfy “due diligence.”

This due diligence effort is often described as an All Appropriate Inquiry (AAI). It involves:

 

  • A site visit – property and buildings.
  • A records search of all available local, county, state, and federal databases.
  • Gathering information on adjacent sites for current or past evidence of contamination issues that could adversely affect the identified property.
  • An assessment of how the past or present liabilities could affect present or planned future activities, on the property.
  • Where liabilities are identified, the possible sources and responsible parties should be identified where this is possible. For example, a leaking underground storage tank that was not properly removed by a previous tenant who used No. 2 heating oil before the building was converted to natural gas.
  • The Phase I Environmental Site Assessment (ESA) report must be detailed and specific about each and every potential liability either as an Area of Concern (AOC) or a Recognized Environmental Condition (REC), and, where possible, recommend the next step of action where liabilities have been identified such as Phase II (Testing) or Phase III (Remediation). Where possible, the source of the contamination or liability should be identified.

 

This entire process, if done professionally, is intended to satisfy the legal aspects of “Environmental Due Diligence” protecting innocent parties from responsibility of someone else’s contamination or some other detrimental effect.

If you need additional information, please contact us at 800-344-4414 or info@atlenv.com.

 

References

 

www.astm.org/standards/E1527.htm, Missimer, T.M., Missimer, M.M., “A Lender’s Guide to Environmental Liability Management”, CRC Press, 1996.

 

American Bar Association, “Environmental Aspects of Real Estate and Commercial Transactions: From Brownfields to Green Buildings,” 07:39, February 27, 2017.

 

Department of National Resources, Wisconsin, “Basic Elements of Phase I and II Environmental Site Assessments,” http://dnr.wi.gov/files/PDF/pubs/am/AM465.pdf.

 

Thornhill, J.A., “Phase I Environmental Site Assessments: What Are They and Why Do We Do Them?,” Quick Council, Associated Corporate Council, October 1, 2014.

 

 

Our primary service areas for Phase I Environmental Site Assessment (ESA) in compliance with ASTM-E-1527-2013 are: NJ, NY, NYC, PA, CT, DE, (Boston) MA, RI, Wash DC, WI, MD, MI, (Chicago) IL, VA, IN, (Atlanta) GA, AL, NC, SC, TN, (Dallas) TX, OK, DC, AR, we can service most other areas of the U.S. but with some added travel charges.