Environmental Site Assessments (ESA) are the industry standard when it comes to conducting due diligence for commercial real estate transactions. A Phase 1 ESA is an assessment of the current and potential environmental contamination at a site. The Phase 1 ESA process includes a site visit, an examination of the historical uses of the property, and a review of government records. Based on this information, a Phase 1 ESA report will identify any potential environmental concerns that should be investigated further.
A Phase 1 ESA is important because it can help to mitigate environmental risk assessments associated with a property. In the United States, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) allows for liability to be imposed on parties who contribute to or are otherwise connected to the release of hazardous substances into the environment. If a party can show that they conducted a Phase 1 ESA before acquiring property and took appropriate steps in response to any identified concerns, they may be able to avoid or limit their liability under CERCLA.
Although Phase 1 ESAs are not required by law, they are often required by lending institutions as a condition of financing a real estate transaction. Additionally, many commercial leases now contain provisions requiring tenants to obtain a Phase 1 ESA before signing the lease agreement. Azure Group is a top-recognized Environmental Consulting Firm in Mississauga and Toronto that has significant experience conducting Phase 1 ESAs and can help you to understand your environmental risks and obligations.
The Three Components of a Phase 1 ESA Report
A Phase 1 ESA report must include three components to be considered complete:
· A site visit – This involves physically visiting the property in question and taking note of any visible evidence of contamination, such as drums or other storage containers, spill stains, or odors. The site visit also provides an opportunity to take photographs and talk to current occupants or neighbors who may know about previous activities on the property that could have resulted in contamination.
· An examination of historical uses – This involves research into past activities that have taken place on the property to identify potential sources of contamination. This can be done by reviewing government records, such as zoning records or permits, or by conducting interviews with previous occupants or neighbors.
·A review of government records – This involves searching for recorded environmental cleanup actions or regulatory violations that could indicate past contamination at a site. Typically, this search is conducted at the local level, but may also include state or federal records if warranted by the circumstances.
Conclusion:
Phase 1 ESAs are an important tool for mitigating environmental liability risks when acquiring commercial real estate. Although they are not required by law, they are often required by lenders and landlords. A complete Phase 1 ESA report must include a site visit, an examination of historical uses, and a review of government records.
