Understanding Environmental Due Diligence

Posted: October 28th, 2009 | Author: | Filed under: Phase I ESA | Tags: , | Comments Off on Understanding Environmental Due Diligence

Environmental due diligence seems to be a byword in today’s real estate industry. But what is it really and how does it impact the way business is conducted?

To further understand this, we need to first define due diligence in relation to the industry. When we hear the term “to exercise due diligence”, it simply means being extra cautious in the way we conduct the business. Everything needs to be further scrutinized to ensure that nothing is out of place and that all is in proper order.

Environmental due diligence is simply making sure that the land being purchased does not pose any potential risks or environmental hazards that may affect the area’s development or its future occupants.

This procedure, although commonly done today, was not really practiced before the 1980s. During that time, there were already concerns regarding the non-disclosure of property developers of potential risks to their buyers. A well known case was about the residents of Love Canal in Niagra, New York during the late 70s. They were not properly informed that they built their houses on an environmental time bomb of hazardous materials that eventually found its way to their water sources.

However, in spite of such news, and the dramatic increase in the awareness of an existing law on this, it still did not gain much popularity and was utilized mostly by large corporations with businesses in Europe. It was only during the early 1990s that EDD started to be widely used when proper implementation guidelines were determined.

The growing worldwide awareness regarding the environment and widespread concern on the impact of past land usage on current properties served as catalysts that made environmental due diligence a necessity. Property owners, developers, sellers and buyers understood the need to protect themselves from future liabilities.

The environmental site assessment is conducted in different phases depending on the requirements and the extent of information needed regarding the property. Phase 1 ESA is primarily based on data collected from researching the history of ownership of the land and how it was used. Usually, a property condition assessment is also done at this phase to create a more comprehensive report for the use of buyers and sellers.

Should anyone need a more thorough investigation of the site where actual samples will be collected and processed, then there is a need to go to the next levels or phases.

The nature of the work involved requires a specialized team. Companies providing environmental engineering services and industrial hygiene consultants are called upon to implement this. They should not just be Baccalaureate degree or Professional licensee holders in the fields of science or engineering, but more importantly, must possess the necessary experience in such field of work.

Environmental due diligence is a matter taken very seriously by people in the industry. It is not limited to determining the hazardous nature of a property. It goes beyond that. EDD help safeguard the environment. It is therefore important to hire competent consultants who will maintain a sense of impartiality so as to submit credible reports.

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