Commercial Environmental Examinations – Set Phasers to “Green”

On the off chance that you are a Star Trek fan, you can appreciate the title of today’s piece. If not, allow me to briefly explain.  Whenever Captain Kirk sensed trouble, he would tell the crew he was with to “set phasers to stun.”  Or, if the alien was bad enough…kill. Today, though, we are not talking about phasers, but phases, and those phases refer to environmental examinations.

So, you are touring an investment property that is in the warehouse district. The building looks good from the outside, there is adequate parking, and the roof was even replaced the prior year. Oh, did I mention that the price was right in your wheelhouse? What could possibly derail the transaction? Inspector Gadget could…

Environmental site assessment phases help classify probable or existing environmental contamination liabilities. These assessments fall under due diligence and help give an accurate picture as to the amount of work needed to be put in to bring the property to a proper, healthy level.  Let’s look at the differences between the two phases of inspection.

Phase I helps build the scope and framework for the property in question. It includes interviewing the current owners for work that has been done. There are a lot of records to review, looking into whether there were hazardous materials used on site. Phase 1 also allows for research with the local government for history with the property, reviewing adjoining properties and comparing the current condition to the original site plan. The goal is to decide if the property was contaminated in the past. If warranted by the report, a Phase II assessment can be ordered. Cue up the intense music…

Phase II ESA will confirm the presence of hazardous materials on the property, helping protect a potential buyer, lender, investor, or another interested party on the transaction from environmental liability.

Another difference is Phase II assessments are unquestionably more intrusive than Phase I. In Phase I ESA (environmental site assessment), evaluators record things like deeds, aerial photographs, surveys, maps, and other essential documents and even examine records of other nearby properties. While Phase II assessment will assess more things like subsurface soil borings, groundwater monitoring well installation, minerality tests, drum sampling, sampling of dry wells, floor drains and catch basins, transformer/capacitor sampling for Polychlorinated Biphenyls (PCBs), testing of underground storage tanks and much more.

The Phase II goal is to assess actual presence of environmental contaminants. For example, if a Phase I determine if a vapor encroachment condition is likely to exist at the subject property, the Phase II will further highlight potential remedial actions that may be required to clean up the property. Determining actual costs to clean up potentially dirty land can help hold a transaction together or allow you a way out.

Just as in Poltergeist, the movie, having a more thorough inspection of the grounds may have helped “unearth” their eventual problem of the ancient Indian burial ground, your environmental tests can help save you from numerous future EPA clean up expenses. So, set your “phases” to Green, and best to you in closing that transaction!

Contact Howard Freedland for all of your commercial real estate needs!
📱 561.888.2735
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