IDENTIFIES POTENTIAL OR EXISTING ENVIRONMENTAL CONTAMINATION LIABILITIES
**Standards for a Phase I ESA Report have been updated from E1527-13. Please visit our service page for more information.
A Phase I Environmental Site Assessment, commonly referred to as an ESA, or Phase I ESA, is completed to research the current and historical uses of a property as part of a commercial real estate transaction. The intent of the report is to assess if current or historical property uses have impacted the soil or groundwater beneath the property and could pose a threat to the environment and/or human health. If these issues are found, it presents a potential liability for the lender and/or owner, as well as affecting the value of the property. A Phase I ESA completed prior to the closure of a real estate transaction can be used to satisfy the requirements of CERCLA’s (Comprehensive Environmental Response, Compensation and Liability Act) innocent land owner defense under All Appropriate Inquiries (AAI).
Phase I Environmental Site Assessment reports can be completed on all types of properties including vacant land, agricultural, multi-family residential, commercial, and industrial uses; however, all Phase I ESA reports are completed to comply with ASTM E1527-13 (exceptions are made for properties comprised of large primarily undeveloped land, which can be researched under ASTM E2247-16).
A Phase I ESA typically includes the following:
This research is evaluated by the Environmental Professional (EP) to identify potential environmental risks to the property, such as current or historic operations that are known or suspected to have used hazardous substances or petroleum products during onsite operations. Some very common uses of concern are dry cleaners, gas stations, auto/vehicle repair, printing operations, and manufacturing. In addition to potential soil and groundwater contamination, ASTM E1527-13 addresses the concerns associated with contamination in soil vapor and the potential for vapor migration to pose a threat to onsite and offsite tenants.
While not part of ASTM requirements, Phase I ESA reports typically includes a discussion of observed suspect asbestos-containing materials (ACM), potential lead-based paint (LBP), and mold growth, as well as the potential for lead in drinking water and radon. Sampling for these non-ASTM concerns is beyond the scope of a standard Phase I ESA but can be included upon request.
ASTM E1527-13 provides the guidelines for a Phase I ESA report to meet industry standard, but there are other factors to consider when ordering a report. Projects associated with Fannie Mae, Freddie Mac, U.S. Department of Housing and Urban Development (HUD), and the Small Business Association (SBA) each have their own report requirements. This is also true of other lending institutions.
Once a Phase I ESA is complete, the Environmental Professional will summarize what concerns were identified on the property and make recommendations about what actions, if any, are needed to address these concerns. A recognized environmental condition (REC) indicates known contamination or the potential for the subsurface to have been impacted by contamination (either from the subject property or possibly from an offsite source). A controlled recognized environmental condition (CREC) identifies that the property has been impacted by contamination which has been investigated and remediated; however, contamination remains and would require additional work if redeveloped. A historical recognized environmental condition (HREC) identifies a release that impacted the subject property, which has been investigated and remediated, meeting unrestricted use criteria.
Identifying a REC will often include a recommendation for a Phase II Environmental Site Assessment to collect soil, groundwater, and/or soil vapor samples from the subsurface to analyze for contamination.