Environmental Assessments – Part 2

Last week, I introduced Environmental Site Assessments and the cost to address any issues found (called remediation): Phase 1, Phase 2, and Phase 3. I reviewed the first phase, so this time I’ll review the last two phases.

As a brief refresher, the whole reason for the assessments is to determine whether a property is contaminated and what it will take to fix it. If you’re an investor or lender interested in commercial property, you don’t want to get stuck purchasing (or foreclosing on and owning) a property that will require expensive remediation to address the ills of a bygone era.

We’re talking about anything from a little fuel from a leaky tank or asbestos in ceiling tiles to toxic chemicals disposed of in a way that puts people, animals, or the environment (or your bank account) at risk.

Remember, during a Phase 1 assessment, an investigator will review county records, make a few phone calls, check out the neighboring properties, and try to determine whether contamination is likely. Phase 1 is, for the most part, a paperwork investigation. Many investigations never need to go beyond Phase 1.

A Phase 2 assessment means something from Phase 1 raised an eyebrow. Determining the validity of any potential exposure gets expensive. We’re talking about contractors and engineers taking building material samples, as well as soil samples and water samples at various depths. If all goes well, Phase 2 tests will indicate no contamination and you can kiss then contractors and engineers on the cheek, pay them with hefty checks, and wave goodbye. If contaminants are found, you begin the next phase of your adventure.

Depending on the Phase 2 findings, recommendations will vary. At the very least, you’ll probably be required to install monitoring wells to determine the amount and disbursement of the contamination and whether it’s moving. If it’s moving under your property from one of your neighbors, you may have recourse against the neighbor, but you’re probably not off the hook.

The opposite extreme of monitoring wells in terms of expense (and environmental concern) is complete remediation: welcome to Phase 3. If you thought the wells were expensive (and I’m sure they were), wait until you have a backhoe digging a hole in the middle of your property 50 feet across and 30 feet down (2,750 yards of contaminated dirt-_- that over 250 dump truck loads). And all this dirt goes to a special landfill rated to accept the type of contaminates found in your soil. These landfills charge by the yard of material. This situation is rare, but it does happen.

This helps explain why prospective buyers of suspect properties do extensive testing before taking title, since liability can run to the current owner. It also helps explain why lenders want environmental assessments before lending on suspect property, since their ultimate recourse on a loan is foreclosure and potential ownership of the problem.

By the way, environmental studies don’t happen overnight, nor are they cheap, but they are far less expensive than the possible ramifications of acquiring the property without one.

If you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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