December 12, 2012

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Changes may be in store in 2013 to the Phase I Environmental Site Assessment (ESA), which has become the first step of environmental due diligence in the real estate world. The ESA is prepared as a part of most commercial transactions involving real estate and identifies known or potential environmental liabilities on the subject property, including contamination in soil and groundwater and possible hazardous building materials, among other risks.

The American Society for Testing and Materials (ASTM) establishes the standard used for ESAs in conjunction with the Environmental Protection Agency, which promulgates regulations governing what inquiries are necessary into the environmental conditions on a property. The ASTM requires each of its standards to be reviewed and updated every eight years. The current standard on Phase I ESAs was issued in 2005, so revision will likely occur in 2013. No draft of proposed changes is available yet, but it’s thought that the new standard may require that vapor encroachment be considered in the Phase I report and recognize a new category of Recognized Environmental Conditions (RECs), a “Controlled Recognized Environmental Condition.” The “CREC” would refer to environmental contamination currently under control but which may pose a threat in the future. Another potential change may mandate review of some files in local, state and federal regulatory agencies concerning adjacent properties. Review of these files is often included in Phase I reports already, but requiring such review may well increase the cost of the Phase I and/or the length of time necessary to prepare the report.

We will post more detailed information on Environmental Matters as the changes to the ESA begin to take shape.