A Phase I Environmental Site Assessment is the first step to due diligence in a commercial real estate transaction. If properly done, it can be the best way to protect property buyers like real estate lenders and investors from assuming the environmental liabilities of previous owners or tenants.
The purpose of this assessment is to identify any environmental concerns that exist within a property prior to its purchase. The assessment process will include site reconnaissance along with research and interviews with property managers, regulatory agencies, and representatives of the public. As it’s the first step in the process of environmental due diligence, actual sampling of groundwater, soil, and air is not necessarily conducted.
Under the stipulations of the Environmental Protection Agency’s (EPA) Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), should environmental concerns be discovered, strict liability must be imposed on property owners in cleaning up hazardous substances at the properties that they own or operate, or have previously owned or operated. This means that under CERCLA, strict liability can be imposed on the basis of property ownership alone.
In the US, Phase 1 Environmental process establishes the standard for Good Business Practice (GBP) in conducting site assessments. Considering the dangers of assuming strict liability from the previous owner and the expensive cost of cleanup, any property buyer would do well to have the process done before finalizing the purchase of a property. In these events, getting the help of a site assessment consultant like Property Conditions Assessments will be necessary.
If a property owner is implicated, he can liberate himself from liability if he can prove that he “did not know and had no reason to know” that the property has been contaminated by a hazardous substance. This is what’s commonly known as the “Innocent Land Owner Defense”. Its application is achieved by performing All Appropriate Inquiries (AAI) on the environmental history of the property before it is sold.
In connection to environmental site assessment, AAI is the process of evaluating a property for any environmental contamination and identifying the potential liability for it if contamination does exist. Specific requirements for AAI and the reporting procedure can be found in the EPA Final Rule at CFR Part 312. You can read more on this rule by visiting the EPA website.
Architect with Plans – FreeRangeStock
Image URL: http://freerangestock.com/details.php?gid=&sgid=&pid=21399
Building Contruction ahead – PixaBay
Image URL: http://pixabay.com/static/uploads/photo/2012/02/23/08/44/construction-15759_640.jpg