Phase I and Phase II Environmental Site Assessments: Real Estate Radio Hour Legal Minute, March 8, 2014

My March 8 Legal Minute addressed the issue of Phase I and Phase II Environmental Site Assessments.  Click here to listen to the audio.

Commercial real estate transactions present a different set of issues than residential transactions.  While many of the disclosures (lead paint, methamphetamine, etc.) common to a residential transaction are not required, commercial properties have their own unique set of environmental issues to deal with.

In order for the buyer to conduct environmental due diligence on a commercial property, a common provision in a commercial real estate purchase agreement is a requirement that the seller provide the buyer with a copy of any Phase I environmental site assessment for the property. 

A Phase I environmental site assessment is a report prepared for a real estate holding which identifies potential or existing environmental contamination liabilities. The analysis typically addresses both the underlying land as well as physical improvements to the property. A proportion of contaminated sites are “brownfield sites.” In severe cases, brownfield sites may be added to the National Priorities List where they will be subject to the U.S. Environmental Protection Agency’s Superfund program.

The actual sampling of soil, air, groundwater and/or building materials is typically not conducted during a Phase I. The Phase I is generally considered the first step in the process of environmental due diligence. Standards for performing a Phase I site assessment have been promulgated by the Environmental Protection Agency.

If a site is considered contaminated, a Phase II environmental site assessment may be conducted, which is a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons.

As always, archived segments are available here.