Note: This article originally appeared in Properties Magazine, September 2001 Issue, page 25.
ESSENTIAL DUE DILIGENCE – THE PHASE I ENVIRONMENTAL SITE ASSESSMENT PROCESS
By Steven R. Pressman
The Goal Is Quality
The primary reason to order a Phase I Environmental Site Assessment is to disclose the dollar amount of environmental liability. Rarely are properties offered for sale so ruined by pollution that their economic worth is a negative number. Even excellent industrial properties require some environmental work upon change of use. A quality Phase I is performed to the American Society for Testing and Materials standard ASTM E 1527 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. It will give an accurate depiction of the current state of the property, the properties adjacent to it, and its history. The Phase I assessment differs from the Phase II assessment in that it is purely an exercise in the presentation of observations and documentation. The Phase II will entail the sampling and laboratory analysis of soil, water, air, and building materials.
A well constructed Phase I report will include a realistic dollar amount environmental liability of the property, its location, description, past uses, observations, and recommendations for further action. Physically the report consists of the information outlined in ASTM E 1527, supporting documentation, and is illustrated with the necessary maps and photographs.
Phase I Elements
The following items are studied during the documentation search and walk through of the property:
Uses – What uses the property has been put to in the past.
Aerial Photographs – Give a good representation of the target and adjacent properties..
Fire Insurance Maps – Often document past uses of the property.
Property Tax Files – Give the property’s location and the identities of past owners.
Recorded Land Titles – More information on the property’s location and the identities of past owners.
Topographic Maps – Give the exact geographic location.
Local street Maps – Give the current street location. Keep in mind that street names change.
Building Department Records – Show the past construction permits applied for.
Zoning/Land Use Records – Show permitted uses within a given geographic location.
Other Historical Sources – Local historical societies and libraries often contain books and pamphlets on particular properties, buildings, and companies.
Computer Data Base & Literature Searches
Environmental Data Resources, Inc. and like computer environmental search firms provide essential information. This includes the results of US Environmental Protection Agency (EPA), state, and local environmental inspections and penalties. This includes the federal governments Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS) is the list of sites currently being investigated by the USEPA for pollution by hazardous substances for possible inclusion on the National Priorities List or Superfund. These reports include information on underground storage tanks, hazardous materials, and other information.
The Walk Through Inspection
The walk through inspection of the property includes observations of the condition of interior and exterior spaces. Roads, drainage, water sources, and sewage systems are noted in relation to the present and past uses of the property. As are hazardous materials, storage tanks, drums, electrical transformers, asbestos containing building materials, standing pools of liquid (water or otherwise), and other indications of environmental impact. Hazardous materials manifest themselves as stressed vegetation, stains, corrosion, odors, sheens on standing water, and discolored soils. While each observation may be significant, observations should be relevant to the total condition of the property. With greater weight being given to say, five ten thousand gallon underground fuel tanks on a one acre plot, than a one foot diameter oil stain in the middle of the floor of a twenty thousand square foot factory.
Interviews and the Neighborhood Walk
Current, and if possible past occupants of the property and adjacent properties should be interviewed. People who have first hand knowledge of the property and especially past uses carried on therein, can make the necessary research very easy. Their information is very valuable where blueprints are old or nonexistent. Walking the site and the adjacent area gives the context in which past uses took place in. This is important since current neighborhood activities will determine future use of the site.
Demand For Site Assessments
Presently the Phase I Environmental Site Assessment is a standard prerequisite for industrial property transactions. However, many real estate professionals who specialize in commercial and residential properties have gone through their entire careers without ordering a single Phase I.
This may be do to the fear of finding another Love Canal. The notorious New York State residential subdivision was built upon a toxic waste landfill, took from its owners under eminent domain by the local school district. A Phase I report would have prominently featured this fact and prevented lost of life, illness, and millions of dollars worth of damage.
Usually “selective memory” is limited to much smaller environmental issues such as lead paint disclosure forms and floor tiles which may be asbestos. Oddly enough buyers as well as sellers will choose to ignore minor environmental issues as speed bumps on the way to a sale.
Most commercial and residential property transactions happen without difficulty. Though the age, prior use, and location of the property should be considered when deciding to order a Phase I. Examples I have seen include: a Victorian house whose owner burnt out five gallon paint cans for reuse during World War 2. A strip shopping center next door to a defunct petroleum distribution center. Farm land being converted to residential use containing buried pesticides, herbicides, and underground storage tanks. And any number of warehouses converted to loft apartments.
In the long run it is best to approach any real estate transaction with the best information obtainable.
Steve Pressman is the President of ANILINE ENVIRONMENTAL, a Cleveland, Ohio based provides industrial hygiene, safety, and environmental consulting firm he founded in 1988. Services offered include environmental testing, acoustic design, asbestos inspections, indoor air quality and Phase I & II Studies. The firm also publishes custom safety and environmental compliance program manuals for its clients. He holds a BA Degree from the Cleveland State University, Maxine Goodman Levine College of Urban affairs.
This page, and all contents, are Copyright © 2001 by Steven R. Pressman, Cleveland, Ohio USA.