Property Transactions Require Phase I Due Diligence

Buying a Property?

There are definitely some deals to be had in just about any real estate market, even more so in the current marketplace. But when the deal seems too good to be true or your lender just wants some assurance that there are no looming environmental issues, that’s when the Phase I makes a lot of sense.

What the !*#&% is a Phase I Anyway?

Phase i site investigation

Known as an Environmental Site Assessment (ESA), the Phase I ESA is considered the first step in the process of performing environmental due diligence. The Environmental Protection Agency (EPA) set the standards for performing an All Appropriate Inquiry, which a Phase I is based in part on (ASTM in Standard E1527-05). New Jersey’s Site Remediation Program (SRP) even has their own version called a Preliminary Assessment (PA).

Sound complicated? It can be! But don’t get confused; performing a Phase I meets the requirements of CERCLA (The Innocent Landowner Act) which protects the purchaser from otherwise hidden environmental constraints incurred by others. That’s extremely important.

A Good Tool for Negotiations

A good negotiator will recognize the real power of the Phase I lies in not only identifying hidden environmental issues and Federal protections, but that the resulting report is an excellent tool at the negotiation table.  Many real estate investors leverage the Phase I findings against the purchase price. Often, the current landowner knows little, if anything, about a Phase I, and can often be swayed to better terms over the knowledge of potential marketing solution environmental issues that may be uncovered.

All Phase I’s Are Not Created Equal

So your shopping Phase I’s, but how can you tell who’s going to serve up a “boiler plate” Phase I versus a well researched and thought out Phase I? Ask for a sample of one or check some references. The environmental professional should have no issue in sharing a sample of his work. Lets face it, this is a big deal and education is a huge part of all this. Take some time to find the right firm to partner with.

So Why Doesn’t Everyone Conduct a Phase I?

The Phase I is a common tool when performing property Due Diligence. However, many property speculators still prefer to “roll the dice” regarding hidden environmental constraints. When one considers the protection offered by a Phase 1 versus the minimal cost, it’s clear that more Phase I’s should be done. The Phase I is one of the most important tools in your Due Diligence arsenal.

Want to Learn More about Phase I and your Environment?

Thinking of buying a property and want to bounce some environmental questions off an expert? GreenWorks can help! We live at the cutting edge of where your home environment collides with the natural environment. We are experts at using simple, sound science to create affordable solutions to just about any enviromental issue. Give us a call or forward this piece along to one of your “real estate”  friends. We’ll appreciate it and so will your friends!

Pssst –Check out a site inspection conducted as part of a dual commercial / residential Phase I assessment. Caution: It ain’t pretty!