Conducting a Phase I site assessment before completing a transaction for commercial property is an essential component of the due diligence process for several reasons.
Identifies Past Usage
As businesses come and go, a commercially zoned property can change hands several times. A Phase I ESA can identify the past uses that could have impacted the site over many years and the potential environmental ramification. For example, if the site previously served as a gas station or dry cleaner, the contamination risk is higher than if it were a retail shop or accounting firm.
Reduces Risk Exposure
Though the intended use for the property may not present any environmental risks, it is possible that previous owners engaged in activities that caused contamination. The assessment can identify these issues and the appropriate remediation steps before moving on to a Phase II assessment.
Learn More About Our Remediation Services >
Meeting the Lender’s Requirements
Although a Phase I ESA may not be necessary with every commercial real estate transaction, lenders may require one before processing a loan. They request this step in an effort to find hidden contamination that could impact the value of the property, as this could affect the buyer’s ability to repay the loan.
Furthermore, if the lender needs to foreclose, it can be challenging to sell a contaminated property. Even after removing the contamination, it can take years to obtain a closure letter that indicates the property is not environmentally dangerous.
Buyer Protection
If a Phase I assessment discovers contamination, the seller can perform the necessary remediation steps under the oversight of the appropriate regulatory body. The purchaser can then conduct a Phase II site assessment to establish the remediation costs and use this information to negotiate a lower price. Conducting this due diligence can also relieve the buyer of potential environmental liability.
Get More Information on Phase II Site Assessments >
Conducting a Phase I site assessment before completing a transaction for commercial property is an essential component of the due diligence process for several reasons.
Identifies Past Usage
As businesses come and go, a commercially zoned property can change hands several times. A Phase I ESA can identify the past uses that could have impacted the site over many years and the potential environmental ramification. For example, if the site previously served as a gas station or dry cleaner, the contamination risk is higher than if it were a retail shop or accounting firm.
Reduces Risk Exposure
Though the intended use for the property may not present any environmental risks, it is possible that previous owners engaged in activities that caused contamination. The assessment can identify these issues and the appropriate remediation steps before moving on to a Phase II assessment.
Learn More About Our Remediation Services >
Meeting the Lender’s Requirements
Although a Phase I ESA may not be necessary with every commercial real estate transaction, lenders may require one before processing a loan. They request this step in an effort to find hidden contamination that could impact the value of the property, as this could affect the buyer’s ability to repay the loan.
Furthermore, if the lender needs to foreclose, it can be challenging to sell a contaminated property. Even after removing the contamination, it can take years to obtain a closure letter that indicates the property is not environmentally dangerous.
Buyer Protection
If a Phase I assessment discovers contamination, the seller can perform the necessary remediation steps under the oversight of the appropriate regulatory body. The purchaser can then conduct a Phase II site assessment to establish the remediation costs and use this information to negotiate a lower price. Conducting this due diligence can also relieve the buyer of potential environmental liability.
Get More Information on Phase II Site Assessments >
