BUYING OR SELLING REAL ESTATE?

Why is a Phase I the Best Money You Can Spend??

Risk Management
An ASTM E1527-13 Phase I Environmental Site Assessment (Phase I) enables buyers to qualify for the innocent landowner’s defense to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a property purchase. Commonly known in Michigan as “Polluter Pays,” buyers will own any historical impacts on a property once they close, unless they complete a thorough environmental due diligence starting with a
Phase I.

A Phase I includes a review of aerial maps, chain of title, Sanborn maps, underground storage tank databases and a walk-thru of the property, but what buyers are actually purchasing is the expertise of the Environmental
Professional conducting the work and their ability to find Recognized Environmental Conditions (RECs)* associated with the property. The most valuable information comes from former employees,
sellers and municipalities

and the best Environmental Professionals are relentless in order to mitigate their client’s risk and expense. In other words they basically become “detectives.”

Accelerates Real Estate Transactions
Buyers need to identify deal killers early on before significant capital is at risk. For the expense of a Phase I (a few thousand dollars), buyers can screen the property for valuable site information, position for future negotiations with the seller (e.g. have the seller discount the asking price should RECs be discovered), manage any impacts that are identified to optimize the site and potentially qualify for incentives.
A Phase I provides cheap insurance if you will.

Conversely, ASTI is seeing more and more sellers doing Phase Is to differentiate their properties and to accelerate the real estate transaction process. As with demolition of blighted and obsolete structures and infrastructure improvements, some sellers are procuring Phase Is to proactively streamline

the property acquisition process by day lighting impacts and managing potential objections that might be raised by prospective buyers.

An interesting aside; a strategy to accelerate the real estate transaction process was adopted by the Michigan Suburbs Alliance in 2003. Their Redevelopment Ready Communities program gave municipalities the tools necessary to accelerate the zoning and approval process to position properties as “open for business.”

Mitigate Expense
All too often a buyer will want to skip the Phase I and proceed directly into a soil and/or groundwater investigation known as a Phase II. We cringe when we hear, “I know it’s contaminated so just take some borings.” This can be a costly strategy particularly if there is no available history for the property which forces the environmental consultant to conduct an estimated sampling program which may not be warranted and can drive fees up unnecessarily.

Summary
It is highly recommended that a Phase I be completed as a key part of due diligence for CERCLA liability protection and to ensure your property is “a silk purse and not a pig in a poke."

For more information, contact ASTI’s
Carey Kratz at ckratz@asti-env.com
or 810.225.2800 ext. 222.

Tech-Bits is a publication of ASTI Environmental, P.O. Box 2160, Brighton, Michigan, 48116-2160. For a free subscription call 800.395.2784

Tech-Bits is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Specific questions should be addressed to your environmental professional. ©2014 by ASTI