Environmental Site Assessments - Managing Environmental Risk

Environmental site assessments, like property condition inspections, may add to the cost of purchasing a property, but could save big headaches (and dollars!) later. While “ESAs" are not normally conducted on the average residential home, they are conducted on improved and unimproved commercial and industrial properties and raw land because of a lender requirement or policy. Significant risk or liability can be minimized by obtaining a report, which is necessary for the purchaser to assert a defense under federal law in the event contamination is found and cleanup is required.

The baseline for conducting ‘all appropriate inquiry’ is the American Society for Testing and Materials regulation ASTM E1527, which includes a 50 to 75-year historical review of the property. Various documents including title work, old directories, land use records, and other public records, are reviewed to determine how the property was used and what types of businesses occupied the property. This information, along with interviews with parties who are familiar with the property, establishes the historical uses of the property. The site assessor also performs a visual reconnaissance of the property to look for above and underground tanks, dumping and signs of fill (debris, barrels, drums, shingles/roofing material, tires), and signs of contamination, such as distressed vegetation and discolored soils. Government records are searched for reported leaking tanks, spills, and cleanup orders. Aerial photographs, which show development or other surface activity over time, are reviewed. These photos sometimes reveal the presence of unreported dumps and landfills, soil movement or disturbances, vegetation distress or changes, and other notable conditions. No invasive work or testing is performed at this time.

Results are included in a report known as a Phase I, which indicates if there are any “Recognized Environmental Conditions“. If additional investigation is recommended or required, invasive sampling and testing is performed to determine if contamination is present. The results of the testing, including the type and extent of contamination is documented in a Phase II report.
While it is obvious that some properties, such as dry cleaners, photo labs, service stations, shooting ranges, and manufacturing facilities, require careful assessment, others that appear less obvious can have major issues. Some of the most contaminated properties include land previously used for farming and ranching. Landowners dump household materials, paints and thinners, pesticides and herbicides, and other waste materials in ravines or ditches, which were subsequently backfilled. Vacant land can be the site of the unauthorized dumping of asbestos-containing materials (roofing materials, old siding, and such), lead-based paint products and materials, drums and batteries. Simply removing these items from the site does not necessarily cure the problem. A Phase II is typically required to ensure that subsurface soils and groundwater are not contaminated and that adjacent properties are not affected by contamination migration.

Environmental due diligence should not be looked upon as a ‘deal-killer’, rather it allows the purchaser and lender to determine if risk is manageable and acceptable. Without conducting all appropriate inquiry, one cannot assert an innocent purchaser defense under federal law – what you don’t know can hurt you, and others, too.

Ms. Clark-Wine, a real estate broker since 1985, achieved a Certified Professional Landman/Environmental Site Assessor designation in 1993 and taught “Managing the Environment” for the Texas Real Estate Commission. She once served as Real Estate Manager for the City of Colorado Springs.




Technorati Profile