Phase I Environmental Site Assessments (Phase I ESA) are an integral tool for managing risk during commercial real estate transactions. As the market-leading expert in Phase I ESAs, Partner fully understands how Phase I Environmental Site Assessment Reports are used by the commercial and multi-family real estate industry. With a global footprint, Partner provides Phase I ESA reports throughout the United States, Canada, Mexico, and Europe for U.S.-based commercial real estate lenders, and those based outside of the U.S. Partner’s environmental reports are trusted and accepted by the most scrutinizing parties including lenders, investors, corporations, attorneys, and other stakeholders. We provide a full suite of solutions because we know that our job isn’t over when we find a problem – it’s when we solve it.
The Phase I Environmental Site Assessment is considered to be the gold standard for evaluating the environmental liability associated with a commercial real estate asset of any type. Whether the property is industrial, commercial, mixed-use, or multifamily, Partner is able to fully assess the historical and current uses of the property. Partner is truly an expert at the implementation of the ASTM E1527 Standard, current with both the 2013 and 2021 requirements. Our Phase I Environmental Site Assessments are done by Environmental Professionals who meet the requirements of the EPA’s AAI Standard.
Our experience in Phase I Environmental Site Assessments dates back to before the creation of the ASTM Standards and includes having participated in standard creation and updates. Having performed Phase I ESAs on hundreds of thousands of properties, we offer our clients an expert perspective on every property type.
The Phase I ESA Scope includes the following:
A Phase 1 ESA is a valuable tool for managing risk for commercial real estate because it helps assess and mitigate environmental risks, facilitates due diligence, provides legal protections, supports financing and insurance, enhances marketability, and ensures regulatory compliance. It is a valuable tool for managing and evaluating the environmental aspects of a real estate transaction.
A Phase I Environmental Site Assessment (ESA) should be conducted by qualified environmental professionals with the appropriate expertise and experience in environmental assessments. It’s important to select qualified and reputable professionals or firms to conduct Phase I ESAs because the accuracy and thoroughness of the assessment can significantly impact real estate transactions, regulatory compliance, and risk management. The American Society for Testing and Materials (ASTM) Standard E1527-13 outlines the specific qualifications and procedures for conducting Phase I ESAs.
The EPA’s All Appropriate Inquiries Rule governing the scope of Phase I Environmental Site Assessments went into effect on November 1, 2006, and provided specific scope requirements for a Phase I ESA to meet the requirements of CERCLA’s innocent landowner defense.
In Partner’s environmental risk practice, we help buyers meet the legal requirements for the CERCLA innocent landowner defense and we provide practical business advice on environmental liability to our clients.
Standards for environmental site assessments are published by ASTM and should be carefully reviewed to fully understand the work to be completed as well as the limitations of reports.
In November of 2021, ASTM published the long-anticipated new standard for conducting Phase I Environmental Site Assessments, ASTM E1527-21, which took effect on January 1, 2022 and replaced the E1527-13 standard as the industry best practice for Phase I ESAs. Upon being published, the standard was submitted to the EPA for review to verify it satisfies AAI requirements. On December 12, 2022 the EPA made a final rule approving the new standard, which became effective on February 13, 2023.
The changes from the 2013 to 2021 ASTM standards do not significantly alter the Phase I Environmental Site Assessment report or process, but there are a few key changes you should be aware of. The most significant changes include:
Historical Research – The E1527-21 now requires the review of at least the “Big 4” historical sources (aerial photographs, topographic maps, fire insurance maps, and city directories) for both the subject property and its adjoining properties. If a Big 4 resource was not reviewed, the EP must explain why the review was not completed and may need to review additional resources. Additionally, if the subject property’s use is industrial, manufacturing, and (now) retail, the review of additional resources (building department records, property tax files, interviews, and zoning), may be needed.
Definitions – The definitions for Recognized Environmental Condition (REC), Controlled REC (CREC), and Historical REC (HREC) have been updated for greater clarity and consistent interpretations. [A simplified flow chart is now included in the appendix to aid in the designation of a REC, CREC, HREC, or De Minimis Condition]. In addition, new definitions have been added for the following terms: Likely, Property Use Limitation, and Significant Data Gap.
ESA Shelf Life – The E1527-21 standard will now require the inclusion of the dates upon which relevant parts of the assessment were completed to make it easier for users to recognize when updates are needed so that they comply with AAI’s 180-day viability timeframe.
Emerging Contaminants – The new standard has added PFAS and other emerging contaminants to the list of “non-scope issues” that a user may want to evaluate as a business risk, as is commonly done with asbestos and mold. Until EPA classifies PFAS as a hazardous substance, it cannot be considered a REC within the constructs of an ESA.
The National Engineering and Environmental Due Diligence Association (NEEDDA), a non-profit formed to improve the practice of engineering and environmental due diligence, has published a user guide for ESAsthat can provide as a useful starting point.
Not all circumstances require a full Phase I Environmental Site Assessment. If the user is not looking to qualify for CERCLA liability protection, like the many lenders conducting environmental due diligence for loan originations, a tiered environmental due diligence policy utilizing both the Phase I and limited-scope or “desktop” environmental reports can be successful at screening for high environmental risk properties. Read more about limited environmental reports.