A Phase I Environmental Site Assessment (ESA) is essential for reviewing environmental liability in relation to real estate properties. An ESA will cover industry guidelines, which evaluate the condition of the property based on various factors. In this blog, we’ll review the process of a Phase I ESA and how it comes into play for commercial property purchases.
What is a Phase I ESA for?
A Phase I ESA is based on federal standards, specifically ASTM E1527-13. This standard identifies the guidelines and procedures that must be followed when performing a site assessment. The goal of a Phase I ESA is to find potential environmental issues or any material that might contaminate a property. When checking this, it will help stakeholders review the risks of the property before trying to proceed with real estate transactions.
Process of a Phase I ESA
There are various parts to accurately evaluating a property. When comparing a Phase I to a Phase II ESA, there are notable differences. A Phase I ESA includes:
- On-Site Inspection – An environmental consultant will perform a physical review of the property. They will also check into current and previous use of the land and what operations have occurred on the premises. This is optimal for identifying environmental issues that could impede future operations.
- Reviewing Record History – To effectively evaluate the property, more records will have to be reviewed, including documents from local, county, and state government. These documents have mentions of land usage, what permits were required for legal construction, and compliance documentation.
- Data Collection – During the inspection process, environmental consultants will collect all the necessary information for the assessment. This includes land limitations, photographs, topographic maps, and insurance-related documents. Different pieces of evidence can indicate specific problems to be aware of.
- Related Interviews – Finally, individuals who have direct knowledge of the property will also be interviewed. This can include, but is not limited to, current or previous owners, tenants, and neighbors. Direct accounts of the property will aid in providing information that relates to previous operations on the property and other context that might be valuable to know.
Relation to Commercial Property Sales
A Phase I ESA is able to benefit both parties of a transaction. A few of the benefits include:
- Risk Mitigation – Identifying environmental liabilities is only the first step of the process. Once an issue is identified, stakeholders can take the appropriate action to minimize and mitigate property risk.
- Regulatory Compliance – Compliance guidelines are essential encouraging property owners and related investors to follow the law. If ignored, these individuals can face hefty penalties which include fines or even incarceration depending on the circumstances.
- Financial Protection – Assessments will help buyers evaluate a suitable price point that the property is worth. This helps avoid exorbitant costs and fees!
- Market Value Estimation – Lastly, a property that is kept up with has the potential to reach more buyers than a property that is left to rot. A site assessment ensures that a buyer knows the property is kept up with and what problems could be a bigger issue.
Are you ready to conduct a site assessment? In case you see a property you’re interested in, don’t risk a reactive purchase! Visit our website to learn more about both Phase I & II ESA’s. There is much more information to hear about which we couldn’t cover in our blog. Once you’re ready to get started, contact us and our team can assist you!
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