Due Diligence/Site Assessment
Most non-residential real estate transactions these days involve some
form of environmental due diligence (the procedures that protect innocent parties from
potential environmental liability). Whether you are buying a small vacant property in a
rural area or a large industrial property in an urban area, due diligence is likely to be
an important component of your real estate transaction.
Conducting due diligence provides baseline environmental information
necessary for making sound business decisions associated with acquisition and financing of
industrial, commercial, or developable properties. Knowing the environmental condition of
a property enables you to weigh environmental risks as a factor in your real estate
transaction decision. An environmental assessment can be a useful tool in negotiating an
equitable agreement between buyers and sellers that accounts for the potential liability
of the property.
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History of Due Diligence
Concerns for environmental liabilities associated with property
ownership arose in the early 1980s with the passage of the federal Superfund legislation,
entitled the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA). Under the Act, all parties in the chain of ownership of a property contaminated
by the discharge of hazardous materials are liable under the concept known as joint and
several liability. In New Jersey, the Environmental Cleanup Responsibility Act (ECRA) of
1983 set forth the model by which industrial site due diligence and remediation have come
to be defined.
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Types of Due Diligence
Phase I Environmental Site
Assessment
A Phase I Environmental Site Assessment (Phase I ESA) is the most
common approach to due diligence. It includes a site inspection, a review of agency files,
and a review of the operational history of the site, but no soil or water testing. Phase I
ESA procedures have been set forth by the American Society for Testing and Materials
(ASTM) under ASTM Standard Practice for Environmental Site Assessments E1527-97.
Ira Whitman is a member of the ASTM committee that
establishes and updates the due diligence standards. Some frequently asked questions
(FAQs) and answers regarding Phase Is are provided on our Phase I FAQs.
Phase II Site Investigation
For sites where Phase I assessments determine the presence of areas of
recognized environmental conditions, potential environmental concerns, or where a problem
is apparent from the outset, soil and/or water sampling is usually necessary under a Phase
II Site Investigation (Phase II).
Further investigation under a Phase II may include the following
activities:
- Soil and/or ground water sampling
- Asbestos inventory
- Further historical research
- Additional review of relevant agency files
Where remediation or other physical changes are required to bring a property into
compliance with environmental regulations and/or free from environmental liability, the
action taken is sometimes referred to as a Phase III. Removal of underground storage tanks
and asbestos would be considered Phase III actions.
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Whitman Expertise
The Whitman Companies, Inc. has performed more than 1,000 Phase I &
II Environmental Site Assessments on properties ranging from small vacant parcels to large
industrial developments of over 6 million square feet. Each assessment represents the
product of diligent site detective work, a thorough understanding of environmental issues
associated with historic land use, and a reliance on scientifically based sampling and
analytical procedures that meet all regulatory specifications.
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History
of Due Diligence
Types of Due Diligence
Phase I
Phase II
Whitman Expertise
Phase I FAQs
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