upcoming changes to Phase I environmental site assessments | Buchalter

Commercial Real Estate Professionals (CREs) are well aware that a Phase I Environmental Site Assessment (ESA) is required when acquiring commercial property. Initially intended to demonstrate that the buyer had undertaken “all appropriate investigations” necessary to establish certain defenses against CERCLA’s liability, Phase I SEAs have become an integral part of commercial real estate, demanded by lenders, insurers. and as a common practice.

ASTM E1527-13, which was adopted in 2013, is the current “road map” that environmental professionals must follow when performing a Phase I SEA for commercial properties. ASTM standards are regularly updated and this has just been updated in November 2021. In the nomenclature used by ASTM, the updated standard is E1527-21. However, E1527-21 is not considered “All Relevant Investigations” until adopted as such by the United States Environmental Protection Agency (EPA), which is scheduled for 2022. In the meantime, until the EPA adopts the new standard, environmental professionals are required to continue to adhere to E1527-13, but CRE professionals should be aware of the changes. to come and what they may mean for future transactions.

The biggest question for most CRE professionals is whether the changes will increase the cost and time required to complete a Phase I SEA. The likely answer is yes, but the degree can vary from property to property. ‘other. The 2021 version of the standard will require a more historical review than the 2013 version, which will increase costs for some properties. E1527-21 requires review of the four basic historical documents (aerial photos, topographic maps, city directories, fire insurance maps) for the subject property. If the property has been used for manufacturing, industry or retail, additional historical records should be examined. The 2013 version allowed the auditor to consult only the historical records that he deemed “necessary”, which leads to an increase in workload and costs for suppliers.

The 2021 standard also requires an increased historical review of adjacent properties, not just the subject property. At a minimum, basic historical records will need to be reviewed for adjacent properties, regardless of the results of the review of the subject property. For an isolated commercial property without adjacent commercial, industrial or commercial properties, the increased time and cost should be minimal, but for an industrial property located in the center of an industrial zone with a long history, the increases could be significant. Note that a big reason for the increased emphasis on historical research and neighboring properties is due to instances where dry cleaners that have gone out of business have not been identified in a Phase I SEA.

E1527-21 revised or included definitions for a number of terms, such as recognized environmental condition (CER), and provided an appendix in an effort to bring consistency to determinations of what a REC is. This should not add to cost or time and will hopefully eventually eliminate the exasperating situation where a consultant examines a set of facts and determines that they are not a REB but a second consultant (usually hired by a potential buyer) examines the same facts and calls it a REC, requiring further investigation.

The 2021 revision requires that a title search be re-examined until 1980 for environmental privileges and deed restrictions, whereas the previous revision did not have a fixed date, so this is another area that may increase costs and time. Other changes, such as what needs to be included in the report, are unlikely to have much of an impact, as most consultants have already started including everything they reviewed as an appendix (as evidenced by report size).

The ASTM committee has resisted push to include the presence or likely presence of emerging contaminants that are not yet listed as hazardous substances under CERCLA as the basis for a BER. This has recently become a point of contention with PFAS compounds, a large group of long-lasting chemicals used in many products, such as non-stick cookware and fire fighting foam. The presence of PFAS on a property can be identified as a business risk, such as mold or asbestos in buildings, but this is not part of the main scope of ESA until it is added to the list of dangerous substances CERCLA.

What should a CRE professional expect or demand in the interim period until the EPA adopts the new standard? The 2013 standard is in effect until it is replaced, so the environmental professional must confirm that their EES Phase I complies with E1527-13. If an environmental consultant decides to implement the new standard before it is adopted by the EPA, they should state in their report that their assessment is also compliant with the E1527-13 standard. The new standard covers everything in the 2013 standard, but it should be clear from the report that the Phase I ESA complied with the standard in effect at the time.