Ross Simmons, Senior Project Manager
Many of NV5’s Real Estate Transaction Services utilize Standard Practices and Guides developed by ASTM. Following a two-year pandemic-forced hiatus, ASTM’s E50.2 Committee on Real Estate Assessment and Management recently resumed its schedule of twice-yearly in-person meetings to discuss and update standards. Presented below is a summary of developments related to Real Estate Transaction Services that were discussed at the April 2022 meeting in Seattle.
E1527-21 Standard Practice for Environmental Site Assessments (ESA): Phase I Environmental Site Assessment Process. The most recent update of the E1527 standard was published by ASTM in November 2021. Although the updated standard makes no fundamental changes in the generally accepted Phase I ESA process, the 2021 revision endeavors to clarify and further explain several key provisions, including:
- Extent of Historical Research – In order to identify past uses of a subject property that may have resulted in Recognized Environmental Conditions, the revised standard requires review of commonly available historical resources such as aerial photographs, historical maps, local street directories and interviews. When historical uses cannot be adequately identified from these resources, the revised standard also emphasizes the requirement to utilize additional information sources such as records of municipal building, planning, and fire departments that, in the judgement of the Environmental Professional, are reasonably ascertainable and may be useful in identifying historical uses.
- Identifying Historical Uses of Adjoining Properties – the revised standard emphasizes the already existing requirement that review of historical records must also identify historical uses and occupancy of adjoining properties. Environmental Professionals are not required to obtain additional historical resources solely to identify past use of adjoining properties. But to the extent that historical resources have already been obtained to evaluate the history of the subject property, those resources must also be evaluated regarding the historical use of adjoining properties.
- Searches for Environmental Liens – The E1527 Standard lists several User Responsibilities, in addition to the Phase I ESA, that must be completed prior to property acquisition in order to qualify for an exemption to CERCLA environmental cleanup liability. Among those User Responsibilities is completion of a search for Environmental Cleanup Liens and Activity & Use Limitations (AULs). One means to satisfy this requirement is to contract with the Environmental Professional to obtain a Title Search Information Report. The Title Search Information Report must identify all environmental covenants or easements, environmental land use covenants, restrictions, controls or agreements, environmental liens, or any other recorded instrument that restricts, affects or encumbers title to the property due to the presence of hazardous substances or petroleum products. This search must include current property deed records. The updated Phase I ESA standard extends this requirement to search for any such document recorded since 1980.
The previously existing 2013 version of ASTM’s Phase I ESA Standard has been referenced in federal regulations as one means of complying with the All-Appropriate Inquiry (AAI) rule to qualify for defense against environmental cleanup cost liability. The USEPA is currently evaluating and accepting public comment on a revised AAI rule referencing the ’21 standard. While many players in the industry have adopted the 2021 revision as a standard practice for conducting Phase I ESAs, the currently-in-force AAI rule specifies compliance with the E1527-13 standard. Although there are no substantive differences in process between the two versions of the standard, the USEPA and leaders of the Real Estate Transactions Services industry recommend that Phase I ESA reports continue to reference compliance with the E1527-13 Standard as well as the E1527-21 revision in order to assure full compliance with AAI requirements until the USEPA adopts a revised AAI regulation, likely to occur sometime later in 2022.
E2247-16 Standard Practice for Environmental Site Assessments: Phase I ESA Process For Forestland or Rural Property, Similar in form and process to the E1527 Phase I ESA Standard, this practice adapts some aspects of the property review, such as the site reconnaissance and the historical property use research, to utilize techniques more appropriate and practicable for large tracts of largely undeveloped rural land. On the heels of adoption of the revised E1527 standard, the E2247 standard is being revised to incorporate updated definitions and other common elements from E1527 to encourage consistency where appropriate. The 2022 revision for the E2247 Forestland and Rural Property Standard is expected to be approved and published later this year.
E1528-14 Practice for Limited Environmental Due Diligence: Transaction Screen Process. ASTM recently approved an updated version of the E1528-Transaction Screen standard. Publication of the 2022 revision is expected in the early summer. The TSA Standard is intended as a limited review of potential environmental concerns, a less vigorous investigation than the E1527 Phase I ESA and does not meet the liability exemption requirements of the AAI rule. However, the TSA process may be a less expensive tool for use in real estate transactions with lower collateral values or less perceived environmental risk. The E1528 TSA Standard is designed for use either by trained real estate or environmental professionals, or for use directly by property purchasers or investors with no previous technical training. Variations of the TSA process are also routinely used by agency lenders such as Fannie Mae or Freddie Mac for environmental evaluations on small loan transactions.
The E1528 Standard Practice relies primarily on completion of a questionnaire, with a series of simple Yes/No responses provided by the Property Owner, Property Occupant, and/or a third-party observer completing a visual walk-through inspection of the property. The soon-to-be published 2022 revision includes separate questionnaires oriented to the specific likely knowledge of the owner/occupant and the designated inspector. Questionnaire topics have been updated and clarified to facilitate more complete and accurate responses from the parties completing the questionnaires.
E2018-15 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process. The PCA Standard governing the process for assessing and reporting on the Physical Condition of real estate assets is currently under review. ASTM’s PCA Task Group has identified 20 elements of the Standard for review and possible revision and is currently recruiting additional task group members to help with the evaluation and review process. A first draft of the revised E2018 PCA standard is scheduled for an ASTM ballot in June 2022.
E2600-15 Standard Guide for Vapor Encroachment Screening. A 2022 update of the standard has been approved by ASTM and is expected to be published later in the year.
E3032-15e1. Standard Guide for Climate Resiliency Planning and Strategy. A new ASTM standard currently under development is intended to allow real property investors and lenders to evaluate potential impacts on property values resulting from climate change and other natural hazards, such as floods, rising sea levels, hurricanes, tornadoes, wildfire, and drought. In addition to impacts on property value, the Resiliency assessment is being developed to better understand how well a property’s physical characteristics and management procedures are designed to reduce impacts to property value resulting from climate change and other natural phenomenon. While previous so-called Green Building assessments have focused on answering the question “What is your building doing to the planet?” the focus of this new Resiliency assessment is to evaluate “What is the planet doing to your building?”
About ASTM. ASTM is an international organization that develops and publishes voluntary consensus technical standards for a wide range of materials, products, systems, and services. More than 30,000 volunteer ASTM members serve on technical committees with the philosophy that development of standards by consensus of industry representatives that actually use the standards is generally preferable to imposition of regulations from above. ASTM has no role in requiring or enforcing compliance with its standards, although the standards may become mandatory when referenced by an external contract or government regulation. The E50.2 Committee on Real Estate Assessment and Management includes nearly 500 representatives of the commercial real estate industry, including investors, property managers, lenders, attorneys, and consultants.