December 6, 2018

Due Diligence Tool #3

Phase I ESA
Blog due diligence 3

Why hasn’t this popular street corner been developed? It looks like the perfect investment opportunity!

That popular street corner could very well be a profitable real estate investment, but it could also be a contaminated site in need of serious remediation- not so profitable after all! The best way to know for sure before purchasing a site like this is to have a Phase I Environmental Site Assessment (ESA) completed as part of your due diligence. It is the smart investor’s tool to protect yourself from environmental liability.

An environmental professional conducting a Phase I ESA will research the current and past property uses to determine if and what potential environmental liabilities exist related to hazardous substances and petroleum products. Contamination can be present in the soil, soil vapor, and groundwater beneath a property and may pose environmental and human health concerns. While some property uses – such as gas stations, industrial facilities, and dry cleaners – are more likely to have contamination concerns, an ESA can and should be completed on all types of properties prior to taking ownership.

Who’s responsible for remediation?

Did you know that if you unknowingly purchase a contaminated site, you are the one responsible for cleaning it up? Through the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or commonly known as “Superfund”, it is the responsibility of whoever contaminated the site to clean it up, unless someone purchases the site without doing their proper homework (i.e. completing a Phase I ESA). Get a Phase I ESA completed and don’t let that be you!

A wise investor should have a qualified environmental professional complete a Phase I ESA. Environmental contamination can lead to unexpected expenses during construction, and depending on the site, those unexpected expenses can be very costly to the project! It simply isn’t worth the risk to skip or skimp on a quality ESA just to save a few bucks.

What happens next?

So now that you have avoided any potential liabilities by following “All Appropriate Inquiries” outlined by the Environmental Protection Agency during the completion of a Phase I ESA, the new owner may qualify as an “innocent landowner” under CERCLA liability defense. What developer/owner doesn’t want that peace of mind?

Westwood’s team of environmental professionals are experienced and knowledgeable in the Phase I ESA process. Along with additional in-house experts, Westwood can provide services for the entire due diligence package, to keep clients’ projects moving ahead and equipped with good information.

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