Understanding Phase I ESAs for Real Estate Buyers
"You know what a lemon car is, right? Nobody wants one. Nobody wants contaminated property either."
Why do Real Estate Buyers need a Phase I ESA?
In the simplest terms, the point of a Phase I Environmental Site Assessment (ESA) is to protect a prospective property buyer from getting a lemon of a property. You know what a lemon car is, right? Nobody wants one. Nobody wants contaminated property either. A Phase I ESA is designed to inform the buyer of what they’re getting into while providing liability protection.
How do Phase I ESAs Protect Real Estate Buyers?
It starts with Superfund. The word Superfund probably brings up images of pretty meadows filled with garbage and pipes dumping fluorescent green sludge from a nearby factory into a pristine river. You wouldn’t be far off the mark, unfortunately. Take a look at the Valley of the Drums, a Superfund site in Brooks, Kentucky that has been undergoing cleanup since the 1970s.
Superfund was formed when people started taking issue with the environment getting trashed with contamination nobody wanted to take responsibility for. In response, the EPA formed the Superfund in 1980, which is basically a “super” pool of “funds” the EPA uses to clean up abandoned toxic waste dumps. The money comes from taxes levied on the folks who make these nasty chemicals, including the petroleum industry. Soon after the Superfund was formed, the EPA gave it a fancier name: the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), officially enacted by Congress on December 11, 1980.
CERCLA lives up to its name in that it is very comprehensive and, let’s be honest, is a very long code of legalese nobody reads unless they absolutely must. With that said, there are some powerful protections under CERCLA for buyers and developers of commercial real estate people. These laws are known as “landowner liability protections” or LLPs. Without boring you with what this means as defined under CERCLA, the easiest way to understand it is, if you, the buyer, get a Phase I ESA that is done properly, you won’t be on the hook for any environmental issues that might be discovered after you purchase the property.
What is a Proper Phase ESA and Why is it Important to Do it Properly?
I’m betting your next question is, what do you mean by “done properly”?
After CERCLA established these protections for landowners, they had to come up with a standardized set of rules that every person who is seeking this protection must follow. This set of rules, as you’ve probably guessed, is what we call the Phase I Environmental Site Assessment.
To standardize the steps of a Phase I ESA, CERCLA people met with people from The American Society for Testing and Materials (ASTM), one of the world’s most respected standards development organizations, to create a set of standards in conducting a Phase I ESA. ASTM develops standards for more than 150 global industries, from the quality of building materials supporting a skyscraper to the standards in the production of the ceramic mug you drink your coffee from.
ASTM developed the Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process ASTM E1527-21. It’s a 60-page document outlining the steps to complete a Phase I ESA and the rules that must be followed to ensure the process is done to the standards, and thus, be a legally binding document recognized by CERCLA. The Standard is updated every five years or so. If you’re willing to part with $85 to take a closer look at the Standard, it can be purchased on ASTM’s website: https://www.astm.org/e1527-21.html.
*Note that purchasing the Standard isn’t a requirement for prospective buyers; it’s mostly used by the environmental professional who is preparing a Phase I ESA for a client.
Why Hire Us for Your Phase I ESA?
If you hire us to do a Phase I ESA, rest assured we follow ASTM E1527-21 to the letter. We’ve carefully read every line of this Standard and we have over 40 combined years of experience in conducting these investigations. Don’t buy a lemon. Get a Phase I ESA and feel confident in your choice to protect your future investment.
Do you have more questions about a Phase I ESA? Check out our Phase I Reading Guide here. Or sign up for a free consultation by clicking this link: