Why “All Appropriate Inquiry?”

I am often asked why a Phase I environmental site assessment or Phase I ESA is needed for a transaction.

It may be that a Phase I environmental site assessment was already done a few years back and the prospective purchaser has obtained a copy, and it’s two inches thick! Or the seller may insist that the property is “clean” because he had “all that done” when he bought the property. He’s very convincing and trustworthy, by the way; a salt-of-the-earth kind of guy. Maybe you’ve looked over the place yourself and nothing is remotely suspicious from an “environmental” perspective. It may be that the budget is too tight to add on yet another cost to close. I’ve heard all the reasons and I can see why some might think that way, especially in this economy.

I have two good reasons why you need a Phase I environmental site assessment done before you buy almost any site: first, you’ve got to have a current one to qualify for legal protections as an “innocent land owner” under the EPA’s All Appropriate Inquiry rule; and second, when you go to sell the property, you don’t want a “risk adverse” potential buyer ordering one on his own—from me—and finding all kinds of conditions you didn’t know about! Believe me, the latter scenario happens quite frequently.

The fact of the matter is environmental professionals are trained to spot and uncover previous uses of a property that might have caused significant but unseen, and costly, damage to the site’s soil or groundwater. From my experience, these could include a former storage tank location for an old dairy (now someone’s backyard), a former large dry cleaning plant (now within an apartment complex), an old municipal landfill (now the site of an upscale regional mall), and a former auto repair and body shop business and five underground tanks (all operated out of someone’s backyard in a sleepy residential subdivision—and all that’s left now is a swimming pool!). I could go on…

Also, it’s important to realize that, while many gross environmental conditions have been unearthed and remediated since environmental assessments began to be utilized beginning in the 1980s, subsequent uses must be determined to ensure that no ill has been done in the mean time. I remember driving by an open field on my way to the office for years, only to see at least five drums abandoned there one morning. By the afternoon, the now cordoned site was teaming with guys in white coats. The next day the drums were gone and all was pristine again…except for the regulatory file.

Why risk it? For a site costing thousands or maybe millions of dollars, why cut corners on something so potentially detrimental? Get a trained environmental professional to apply the ASTM environment site assessment standard to a property, before you buy it, and sleep easy at night. Do so and I am pretty sure you won’t be surprised by pungent diesel odors coming out of the ground when you go to add on to your building, or get hit with a reduced purchase offer for your property based on newly found recognized environmental conditions.

It all makes good sense.