Phase I and II Property Assessments

Commercial real estate and construction sites typically involve several layers of regulations. State, local, and sometimes even Federal codes need to be strictly adhered to to ensure compliance. This is especially true if there will be a transfer of ownership with an existing commercial property.

At Hydroscience Group, we have decades of experience performing Phase I & II Property Assessments for commercial real estate. This sophisticated and complex investigatory process will note current and past property uses dating back to the original development of the commercial property.

One of the goals of a Phase I Assessment is to accurately identify any potential or existing environmental contamination concerns, as well as any liability factors. This includes assessing both the underlying land as well as any physical improvements that have been made to the property. It also includes a detailed and accurate record of prior property ownership.

It is essentially a due diligence report of existing and past environmental conditions. A Phase I Assessment is most often prepared for real estate transactions. This includes things like commercial properties, raw land purchases, structure purchases, property leasing, and existing business purchases, as well as new residential developments.

Phase I Assessment information is typically required for bank loans. However, it might also be required in property leases, or in a case where the sale of property happens in conjunction with a change in local zoning laws.

The American Society for Testing and Materials requires compliance on a variety of issues. The ESA Phase I assessment is the standard they adhere to with the Environmental Protection Agency and their All Appropriate Inquiries rule. This is further coded in the EPA’s federal regulations 40 CFR Part 312.

This essentially means that the Phase 1 Environmental report will be required by most financial institutions and other potential lending agencies. Most absolutely require it before approving funding for a property. Especially a commercial property.

Today the Phase I assessment is largely seen as a standard part of the process when selling or purchasing commercial or industrial real estate. It is also common for developers to start a new residential development project.

Much of the same information is also passed on to potential insurance companies and underwriters. This makes it an important part of securing these other necessary aspects of a real estate purchase. It may also influence the premiums for an insurance policy.

Most of the time, a Phase I Environmental Site Assessment is conducted by a local consulting firm or environmental engineering firm. Having hands-on experience in the area is certainly helpful. Fortunately, Hydroscience Group has extensive experience throughout the state of New Jersey. This allows us to make sure that the Phase I Assessment is done right, and that all potential risks on the property have been identified, and codified in a way that other interested parties or governing bodies want to read.

The Phase I Assessment essentially serves to identify all the primary factors of a site before the sale. Generally, as part of a broad inspection process. Should samples or the site’s history indicate areas where there might be a past or present problem, they will be noted for the Phase II Assessment.

The Environmental Protection Agency maintains drinking water regulations that cover up to 90 well-known contaminants. They may be included in a Site II assessment if the evidence is found that they are present in the soil, surface water, or groundwater. This information must be passed on to the EPA to ensure that the highest standards and regulations are maintained.

By the Safe Drinking Water Act, the EPA must also identify and list any unregulated contaminants, that might appear in either the Site I or Site II assessment. This process also requires the EPA to periodically publish this list of contaminants which is known as the Contaminant Candidate List or CCL.

If the site history shows a record of regulated or unregulated contaminants in the soil, surface, or groundwater, the Environmental Protection Agency may also require further tests. This will serve to determine if the problem is still actively present, or that it has been fully remediated and the site remains compliant.