Due Diligence 101: Request a Phase I

By: Jamie Ziemba and Laura Hengle

It is in the best interest of the buyer and the tenant of a commercial property to ensure that a current Phase I (ESA) has been performed for the subject property.  Environmental liability is determined by several state and federal statutes that can put the buyer and the tenant at risk if sufficient due diligence is not conducted as per CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act of 1980).

Under CERCLA, the EPA or another private party may pursue a lawsuit against a current or past owner or operator of contaminated property for costs associated with that property’s cleanup even if that owner/operator is not responsible for the existing contamination.  Depending on the type of property (industrial, retail, etc.) and the duration of exposure, these costs can be extensive.

To defend against such future lawsuits and allegations, the buyer must conduct all appropriate inquiries (AAI) to the previous ownership and use of the property.  In many instances the Phase I prepared in accordance with ASTM Standard E1527-13, can satisfy this requirement.  However, the buyer must request the due diligence is conducted before closing on the purchase of the property.  Additionally, Phase I must be performed by an environmental professional and is only valid for one year and contains some components that must be conducted no more than 180 days before purchase.

To limit the exposure of potential environmental liability lawsuits, be sure to request the Phase I.  For a full listing of the components of a Phase I Report, visit our website or send an email to Environmental@NV5.com.