Commercial Property Due Diligence
A commercial real estate environmental inspection is used to determine cleanup or any contamination of commercial property, while pinpointing liability concerns. The most popular environmental inspection is called a Phase I which uses the standard called ASTM E1527-05 EP AA I.
The engineering firm will use the following tools to evaluate the commercial property that is under inspection:
Site reconnaissance Historical records Government records Other available information sources
Also surrounding properties that have issues may or can migrate into your commercial property.
Time and Cost for due diligence
The average turn time for a commercial real estate environmental inspection is 3 weeks and cost is approx $2000, You can order only pieces of Phase I to be done, if that is the case then it can be used for business decisions or renegotiation strategies . If it is not a complete inspection then it will not cover CERCLA I or no Landowner protection.
You can expedite and associated fees do exist for this , some information that is gathered from other sources can take weeks such as fire department , etc.. so this will add to your turn time.
When a Phase I is required during your commercial property due diligence, it is important that it be conducted by an engineer / Phase I professional who has the education and credentials that are required,you always give the consultant-engineer as much information as possible about the property in question such as it’s history, zoning etc..
Getting a hold of older reports are critical from the seller this helps expedite the reporting , additional add-ins can be lead based paint, asbestos , radon, mold and Chinese drywall
If there is a statement of “No Further action Required” then you are ok, however if that does not exist and there is a REC known as a Recognized Environmental Condition you will need a Phase II inspection done
Big Red Flags – gas stations, dry cleaners , land fills, oil wells and oil fields. Former or existing dry cleaners that use PCE cause a lot environmental issues. Methane gas is an issue with a land fill
Some more : Industrial use with sumps or drains , Auto repair (former)
Historical city directories can be used to see who occupied the space previously all the way back to the 1800’s.
When you see a REC , a Phase II study is typically required, this will cover the following:
Soil, Groundwater, Soil Vapor and Indoor Air for vapor intrusion
Remedial cost estimates are done by characterizing the site during the Phase II , remedial costs can be used to renegotiate the price of the property.