Consider an Environmental Assessment before Foreclosing

Posted: September 2nd, 2010 | Author: | Filed under: Phase I ESA | Comments Off on Consider an Environmental Assessment before Foreclosing

Environmental conditions could reduce the property’s value or create a cleanup liability.

Thousands of commercial properties face potential foreclosure as the result of a struggling economy and the pressure of $1.4 trillion of nationwide commercial real estate loans coming due in the next five years. Lenders can take action up front to manage the environmental and financial risk inherent in the foreclosure process.

A lender considering foreclosure on a commercial property should conduct an assessment of the property for environmental conditions that could reduce the property’s value or create a cleanup liability once the lender assumes ownership.

Under the federal Comprehensive Environmental Response, Compensation, and Recovery Act — commonly known as Superfund — property owners and operators are potentially liable for a release of any hazardous substance at their property.

Lenders generally are exempt from Superfund liability on the basis of two provisions. First, the lender does not participate in the management of the facility, but holds “indicia of ownership” primarily to protect its security interest in the facility. Second, the lender acts quickly to divest itself of the facility after foreclosure.

A lender gains additional protection against environmental liability under the “innocent landowner” provision of Superfund by making”all appropriate inquiry” (AAI) into the history and past uses of a property before foreclosing on it.

Hidden conditions lurking?

A Phase I Environmental Site Assessment (ESA) compliant with ASTM International standards and U.S. Environmental Protection Agency AAI rules will provide sufficient information on the environmental condition of a property. An ASTM-compliant Phase I ESA is a risk-management tool that can assist the lender (or user of the report) in satisfying one of the requirements to qualify for protection from potential liability under Superfund.

A Phase I ESA provides legal protection if it is performed before the buyer takes control or ownership of a property. It allows the lender to claim innocent landowner status, providing protection for the lender from environmental cleanup liability under Superfund.

A Phase I ESA must be completed by an environmental professional who meets the educational and experience requirements outlined by ASTM. The environmental professional evaluates the soil, surface water and groundwater at a property — in addition to the physical improvements that have been made to the property and its surroundings — for the purpose of identifying recognized environmental conditions.

A recognized environmental condition is defined by ASTM as the presence or likely presence of any hazardous substance or petroleum product on a property under conditions that indicate an existing release or a material threat of a release of any hazardous substance or petroleum product into structures on the property or into the ground, groundwater or surface water of the property.

A Phase I ESA will identify recognized environmental conditions via site reconnaissance and visual observations; interviews; record, regulatory, map and photograph reviews; and historical usage research. If a lender is seeking liability protection under Superfund, the Phase I ESA report must be prepared no more than six months prior to taking possession of the property.

A defensible Phase I ESA meeting the AAI criteria for liability protection is a critical element of thorough environmental due diligence. Hiring a qualified environmental professional can result in ongoing communication about a property and timely notification of a significant discovery. The cost of a Phase I ESA is typically $2,500 to $3,500, depending on the size and complexity of the property.

Being proactive

Scheduling a Phase I ESA early in the foreclosure process can be decisive in obtaining property access for inspection of a site. The site reconnaissance supplies information about a property that is not available anywhere else, improving the accuracy and completeness of the conclusions and recommendations. Additionally, sufficient time must be allowed for the necessary regulatory and public agency reviews.

Environmental issues besides the hazardous substances and petroleum products addressed by ASTM and AAI rules may be present at a property. Examples include asbestos-containing materials, lead-based paint, moisture intrusion, radon, vapor intrusion and wetlands. While these “business risk” issues are considered outside the scope of the ASTM standard, lenders often find it advantageous to include them in a Phase I ESA.

A Phase I ESA can be used as a risk management tool to provide protection from Superfund liability. It also is often used to identify potential environmental risks at a property such as improper storage and handling of hazardous materials, underground storage tanks, historical dry-cleaning operations, and historical automobile service and/or repair facilities. Such historical operations often involved hazardous substances and petroleum products that frequently resulted in contaminated subsurface soil and/or groundwater due to the lack of environmental regulations governing the use of these materials prior to the 1980s.

If a Phase I ESA reveals recognized environmental conditions in connection with a property, conducting a Phase II Environment Site Investigation may be recommended to examine the conditions in greater depth. This may include a regulatory file review, additional interviews, a subsurface investigation, or other site-specific action.

The potential liabilities created by adverse environmental conditions are an important consideration that lenders should examine as part of the foreclosure process. A Phase I ESA performed by a qualified environmental professional is an effective way to manage the environmental risk of the foreclosure process and potential financial burdens.

ASTM International Announces First eLearning Course for E1527 Phase I Environmental Site Assessments

Posted: August 27th, 2010 | Author: | Filed under: Phase I ESA | Comments Off on ASTM International Announces First eLearning Course for E1527 Phase I Environmental Site Assessments

ASTM International

Press release date: August 24, 2010

W. CONSHOHOCKEN, Pa., – ASTM International and Environmental Data Resources (EDR) announce an online course offering for ASTM E1527, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.

ASTM E1527 was first published in 1993 and has been revised numerous times since, most recently in 2005. It is one of the most widely published and distributed ASTM standards, and is used in commercial real estate transactions more than 220,000 times each year. Today, the process of performing Phase I Site Assessments is largely driven by the lending industry in advance of closing commercial loans. The purpose of E1527 is to specify environmental due diligence for the objective of achieving landowner liability protections (LLPs) under Super Fund. ASTM has offered an in-person training course on E1527 since 1993 and continues to offer it several times a year at various locations in the United States.

This is the first time that an online technical and professional training course has been offered by ASTM International. The online course features 12 modules of content offered over three weeks and is equivalent to the existing 16-hour in-person course. Participants are able to complete the material at times convenient to them during the three-week time period. Existing course instructors are online daily to facilitate communication, answer questions and participate in forum discussions. Additionally, the instructors will host an online conference call each week to discuss relevant topics and answer any questions that participants may have.

For the remainder of 2010, E1527 online training courses are scheduled for the following dates: Sept. 20, Oct.12 and Nov. 1. Click here to register.

The cost for the course is $895 USD and includes copies of ASTM E1527, course notes, case studies, and information about ASTM and Committee E50 on Environmental Assessment, Risk Management and Corrective Action. Register 30 days in advance and save $100. For more information or to register, go to and choose “commonground University” under the Learn menu.

The in-person E1527 course can be tailored to your company’s needs and brought to your facility by ASTM. Contact Scott Murphy, ASTM International (phone: 610-832-9685; for details. For questions about the online course, contact Lauren Rosencranz, Envrionmental Data Resources (

ASTM International is one of the largest international standards development and delivery systems in the world. ASTM International meets the World Trade Organization (WTO) principles for the development of international standards: coherence, consensus, development dimension, effectiveness, impartiality, openness, relevance and transparency. ASTM standards are accepted and used in research and development, product testing, quality systems and commercial transactions.

Environmental Data Resources, Inc. (EDR) is the leading provider of environmental risk information services and related workflow applications in the United States. As the innovator of the most comprehensive database of environmental and historical land use information, the company provides reports, subscription services and other solutions to help its customers reduce environmental risk. Established in 1991, EDR is headquartered in Milford, Connecticut with regional offices located throughout the United States. EDR is wholly owned by DMG Information Inc., the business information division of Daily Mail and General Trust, plc (DMGT).

Don’t let environmental problems prevent you from purchasing property

Posted: August 13th, 2010 | Author: | Filed under: Phase I ESA | Comments Off on Don’t let environmental problems prevent you from purchasing property

I’m republishing a great article posted in the Oregon Daily Journal of Commerce. I’ll soon be adding information relevant to Illinois customers. If you are in any other state, let me know, and I’ll find out how your state handles this.

“Risk comes from not knowing what you’re doing.”

– Warren Buffett

Many people seeking to purchase property for commercial purposes refuse to consider contaminated properties, because they are concerned about the risk of being held liable for the contamination, or about the time and expense that may be involved in addressing the legal and technical aspects of acquiring such properties. As a result, contaminated properties often are overlooked bargains.

In reality, armed with the proper knowledge, purchasers of contaminated properties will find that it is relatively painless to protect against liability under both federal and state law.

Federal law

In 2002, the Comprehensive Environmental Response Compensation and Liability Act was amended by Congress to encourage prospective purchasers to buy and redevelop Superfund and brownfield properties (i.e., properties known or suspected to be contaminated).

Prior to this amendment, purchasers of brownfields could be held liable for contamination related to the property unless they could establish that they had no reason to know the property was contaminated. This scenario created an obstacle to the redevelopment of properties that were known to be contaminated.

In order to avoid liability, the party seeking to purchase a known-contaminated property could negotiate a Prospective Purchaser Agreement with the EPA. (A PPA is a legally binding agreement between the government and a prospective purchaser of contaminated property that limits the purchaser’s liability for environmental cleanup).

The 2002 CERCLA amendments, however, allow purchasers to buy a contaminated property and avoid potential liability for existing contamination without the need for a PPA, by qualifying as a “bona fide prospective purchaser.” Therefore, in order to protect against potential federal liability for environmental contamination at a property, a purchaser needs to ensure that it qualifies as a bona fide prospective purchaser (BFPP).

A prospective purchaser of contaminated property can qualify as a BFPP by satisfying the criteria in the provision found in CERCLA statutes.

Pre-purchase criteria include:

  • Pre-purchasing “all appropriate inquiry”
  • Not affiliating with a liable party

Post-purchase criteria include:

  • Taking reasonable steps with respect to hazardous substances on the property
  • Complying with any land-use restrictions and institutional controls
  • Cooperating with governmental authorities and persons conducting any cleanup
  • Complying with information requests and administrative subpoenas

Of these criteria, “all appropriate inquiry” and “reasonable steps” typically pose the most significant concerns.

All appropriate inquiry refers to the requirements for assessing the environmental conditions of a property prior to its acquisition. In 2005, the EPA adopted rules governing what constitutes “all appropriate inquiry.” Although a full discussion of all appropriate inquiry is beyond the scope of this column, a key aspect includes a professional’s environmental site assessment, which includes:

  • Interviews with past and present owners, operators and occupants of the facility for the purpose of gathering information regarding the potential for contamination at the facility;
  • Reviews of historical sources, such as chain-of-title documents, aerial photographs, building department records, and land-use records, to determine previous uses and occupancies of the real property since the property was first developed;
  • Searches for recorded environmental cleanup liens against the facility that are filed under federal, state or local law;
  • Reviews of federal, state, and local government records, waste disposal records, underground storage tank records, and hazardous waste handling, generation, treatment, disposal, and spill records concerning contamination at or near the facility;
  • Visual inspections of the facility and adjoining properties.

Additionally, a BFPP must take “reasonable steps” with regard to the hazardous substances on the property, including stopping a present release, preventing a future release and preventing exposure to a prior release. If such steps are not taken, the purchaser could lose its status as a BFPP.

The EPA believes that, in most cases, the 2002 CERCLA amendments make PPAs from the federal government unnecessary, because prospective purchasers need only take the steps necessary to qualify as a BFPP. Only under limited circumstances will the EPA still consider entering into a PPA.

In general, the EPA will consider a PPA when: 1, there is likely to be a significant windfall lien and the purchaser needs to resolve the lien prior to purchase, or 2, a PPA is necessary to ensure that the transaction will be completed and the project will provide significant public benefits.

Oddities of Environmental Site Assessment

Posted: August 9th, 2010 | Author: | Filed under: Phase I ESA | Comments Off on Oddities of Environmental Site Assessment

Things like this are not normally part of a Phase 1 Environmental Site Assessment. It is always interesting to learn about the history of a property. As you may see from the link, All Appropriate Inquiry never gets boring.

Train Tanker Below Car Dealership

Don’t need an Environmental Site Assessment for Residential? Think Again.

Posted: August 6th, 2010 | Author: | Filed under: Phase I ESA | Comments Off on Don’t need an Environmental Site Assessment for Residential? Think Again.

A recent court decision demonstrates the need for even due diligence in every real estate transaction. Don’t count on someone else to tell you what is necessary. If you want peace of mind, do the background research on your propert.

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.

Environmental Due Diligence By ESA

Posted: October 27th, 2009 | Author: | Filed under: Phase I ESA | Tags: , | Comments Off on Environmental Due Diligence By ESA

Doing Environmental Due Diligence is a win-win situation for our environment and for the property owner. That’s why in United States the government is highly recommending every site property to undergo ESA before anything else. It must be the responsibility of the property owner to do this. They need to remember that money isn’t everything and that they need to think of their site’s health and what would be its effect to the environment if they let it be contaminated. So what is ESA?

An Environmental Site Assessment (ESA) is a report prepared for a real estate holding which identifies potential or existing environmental contamination liabilities. It typically addresses both the underlying land as well as physical improvements to the property. When conducting ESA, it is the phase 1 ESA that you need to undergo first.

Phase 1 ESA tells people what lies beneath. Beneath the surface of the subject property as Phase 1 inspect the land. Scrutiny of the land includes examination of potential soil contamination, groundwater quality, surface water quality and sometimes issues related to hazardous substance uptake by biota.

Phase I Environmental Site Assessment reports are normally performed for commercial properties, residential developments, agricultural properties and industrial properties. They are usually required by banks for real estate purchase loans or refinancing. Even if a lender is not involved in the real estate transaction, a Phase I report is recommended as protection from any future environmentally-related liability after taking title to the property.

A property condition assessment also includes a review of local governmental documents regarding the site to determine what the past usage of the site was, along with extensive document review of the surrounding area. It also entails a very involved and detailed site visit by a qualified professional. In addition there is data base information that is gathered and reviewed of the surrounding vicinity to determine if there is a potential risk from an environmental stand point in the immediate area.

These potential risks can be anything from a past gas station on or near the site that might have contaminated the ground water to there having been a dry cleaner on the site that might have spilled chemicals into the ground. There could have been past dumping on the site or an auto repair that did not handle the oils properly, lead in the paint, asbestos, and on and on. Industrial hygiene consultants can detect all of that.

The Phase I ESA 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 US EPA and are based in part on ASTM in Standard E1527-05. If a site is considered contaminated base on results of Phase 1 ESA, A Phase II Environmental Site Assessment may be conducted, ASTM test E1903, a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons. If contaminants are already found and that require removal, A Phase 3 ESA will soon be conducted. This includes remediation of the site.

In the United States of America demand increased dramatically for this type of study.
Mainly because property holders already realized how important it is for their property to undergo ESA before anything else.

In looking for an environmental engineering service to conduct ESA in to your site, remember that you need to find professionals that have the expertise and experience on handling it. Environmental Consultants should have a thorough understanding of environmental laws and practices so that they can quickly provide turnaround on Phase I & Phase II Environmental Site Assessments.

Environmental Site Assessment – Why Do You Need It?

Posted: October 24th, 2009 | Author: | Filed under: Phase I ESA | Tags: , | Comments Off on Environmental Site Assessment – Why Do You Need It?

In the movie Erin Brockovich, the character of Julia Roberts was neck-deep in investigation about the suspicious activities of Pacific Gas and Electric Company, which led to the eventual poisoning and death of the residents nearby the area. After going through a series of unproductive meetings among lawyers, residents and owners the company was soon charged of buying a piece of land that was already contaminated. So what does the movie have to do with you, you ask?   It tells you that you can avoid this situation by getting an Environmental Site Assessment (ESA) for your subject property.

Of course, nobody wants his company to undergo the same mishaps as seen in the movie.   Court trials are time consuming and litigation lawyers charge too expensively that you just want to settle things under the table.  Plus a suspicious site would lessen its credibility and drive people away from it.

Naturally, you would want to retain the value of your property and not get into any kind of legal trouble of any sort. You can do this through Environmental Site Assessment.   Through Phase 1 ESA, you can rest assured that your property is free from potential environmental liabilities like toxicity or contamination.  Professional consultants will determine whether the land you own or are planning to buy is a potential environmental threat because, or what are better known as “brownfield sites.”

In the 1970s, a similar study was done in the United States to inspect commercial properties and to test them whether they are potentially hazardous to health. Now, the US has stricter monitoring than ever when it comes to environmental issues. Before you could actually have an acquisition or a management buy-out, you need to abide first by the environmental due diligence – a kind of investigation which identifies environmental hazards. It will give you details on how a former or a current operation poses a potential risk for your employees and nearby residents.
The inspection will tell you in detail the history of the chosen property, how the former operations contributed to possible environmental hazards, and how you could verify legal compliance from regulation authorities.
Tests are conducted by industrial hygiene consultants. These professionals see to it that every nook and cranny of your would-be land acquisition is scrutinized, looking for loopholes such that lead to toxicological risks.  A property condition assessment is done to check whether if the health and safety requirements mandated by the State are met.   Industrial hygiene consultants perform samplings and assessments, all of which are then turned over to an accredited laboratory for further evaluation. They also see to it that investigations, which include an expert witness testimony and an assessment of workers compensations claims, are done in a discreet and professional manner.
Aside from industrial hygiene consultants, you may also seek help from other companies on environmental engineering services. The services included on this one are feasibility studies, construction oversight, waste management consultation and other facility design services. You can address the underlying issues of pollution or contamination through environmental remediation. Avoid getting into grave legal issues on environmental safety by having your company go through Environmental Site Assessment.