Assessing Environmental Liabilities Before Buying Commercial Property

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When buying commercial real estate, it is essential to get what is called an environmental site assessment. This is part of your due diligence. An ESA identifies contaminants in the soil, so things like petroleum, pesticides, herbicides, and heavy metals are all substances that can be detected in an assessment. In the building, things like mold, lead paint and asbestos will be detected.

Finding any of these substances may lead you to not go through with purchasing a particular property. Or, you may continue to go through with the deal and perform a clean up at the expense of the seller. Lenders require these assessments be done but if you are about to purchase a property with cash, you should invest in an environmental assessment, have a look at for further information.

The first state is called Phase 1. This is where an environmental assessment company will perform a visual inspection. The second phase is Phase II. This may or may not be needed depending on the results of the historic inspection in Phase I. If the results come back that there is a chance of contamination, then it is necessary. There are testing and samplings done during the second phase.

This takes more time as the samples have to be monitored and observed. This process confirms the contamination or lack thereof. The process is done under the standards of the American Society for Testing and Materials.

Phase I offers the advantage of informing the buyer and the seller of the historic use of the property, what went on in the vicinity of the building and so forth. This helps both parties to decide whether to do more investigating or to walk away from the deal.

A business environmental risk is a risk where there is a material or environmental risk that impacts the current use of the property or the future use of it. Phase II is the phase where asbestos and lead paint, radon, and mold are found.

As a buyer, you want to do your due diligence prior to buying a commercial property. Even if some contaminants are found, it is still important to go over them and make a decision to pursue the deal or not. There may be things you can do that will remedy the situation and improve the use of the property. If you do get Phase I or Phase II studies done you will be provided with documentation. Future liability is attested to with closure letters.