Real estate environmental site assessments (ESAs) have become an important step for property owners, prospective buyers, developers, and lending institutions to evaluate real or potential environmental liabilities at a subject property.  In November 2006 the U.S. Environmental Protection Agency (EPA) instituted regulations known as All Appropriate Inquiries (AAI) that established an environmental site assessment “standard” that when followed provided “innocent landowners” a defense against environmental liability in certain situations.  The American Society of Testing and Materials (ASTM) has since developed a “standard of practice” in performing environmental assessments in accordance with AAI that many lending institutions and other decision-makers have adopted as their acceptance protocol when using ESA reports to evaluate environmental risks.

A Phase I Environmental Site Assessment is typically the first step in evaluating real and potential environmental liabilities. These assessments generally involve the collection of existing information, focusing on current and historical land use, property ownership, and oil and hazardous material storage and spills on both the subject property and nearby properties. This information is typically gathered through:

  • Visual inspection of the property, buildings, and surrounding areas;
  • Review of local agency records;
  • Research of state environmental records and release site data bases;
  • Interviews with existing and past owners, tenants, neighbors, and other knowledgeable persons or agencies; and
  • Review of site maps and aerial photographs; and review of prior environmental, geological, and hydrogeological studies.

Based on the results of the Phase I ESA, an informed decision can be made regarding the need to collect more specific information on the property and buildings as part of a Phase II Environmental Site Assessment.  A Phase II ESA can include:

  • Sampling and analysis of soil, ground water, surface water, and wetland sediment;
  • Indoor air quality testing;
  • Testing for asbestos- or lead-containing building materials; and
  • Leak testing of underground storage tanks (USTs), and geophysical investigations for the presence of abandoned USTs.

An ESA report is typically prepared that summarizes the methods of assessment, findings and conclusions as they relate to recognized environmental conditions, and if necessary, recommendations for further actions.  The ESA report is the document that lending institutions and other decision makers rely upon in making informed decisions regarding real or potential environmental risks associated with a property.

An ESA can also be used as a “baseline assessment” in which environmental contamination at the time of a property transaction or lease arrangement is defined, such that it can be distinguished from allegations of environmental contamination caused by potential future releases.