Recently we assisted a client looking to purchase a commercial industrial site that leased heavy equipment. Prior to completing the transaction, the buyer got a Phase I Environmental Site Assessment (ESA). A Phase I ESA is an investigation of a subject property by an environmental professional that reviews current and past history of the property, including its uses. It reviews environmental records in regulatory databases for evidence of petroleum storage tanks, spills of any hazardous substances, remediations or clean-ups, and a variety of other potentially unsafe property conditions. It identifies and reviews neighboring and adjacent parcels for similar use histories and environmental records. It also includes on-site reconnaissance for first-person visual and physical observations of the property and frequently contains an interview with current property occupants.
A Phase I ESA is an essential part of the due diligence required for any individual or business considering purchasing commercial or industrial property that uses or has used hazardous materials. State of Maine and federal laws and regulations place liability and clean up costs for environmental messes not only on the responsible party, but frequently on the owner, even if the owner was not the one that caused the spill or leak. However, in certain situations a proper Phase I ESA can qualify a current property owner for the “innocent landowner defense” for contaminations found on the property after purchase, meaning the owner would not be responsible for the remediation or cleanup. The main benefit of obtaining a Phase I ESA is not the liability protections, but the information it provides a buyer to make a sound investment. If the Phase I ESA reveals recognized environmental conditions on the property, the buyer can be made aware of its purchase risks and depending on the situation may decide to walk away. It could also lead to a buyer conducting a Phase II ESA which conducts sampling and monitoring of surface and subsurface soil and water.
Purchasing a commercial or industrial property can be expensive and occasionally a buyer may feel “nickeled and dimed” and not want to pay for the additional cost of a Phase I ESA, which can run between $1,500 and $6,000. But compared to the potential liability costs in the millions for remediation and cleanup it is a necessary expenditure.