environmental site assessmentAnyone planning to buy, refinance or sign an option agreement on a piece of commercial property in New York or New Jersey should be aware of the need for a Phase 1 environmental site assessment. It’s a result of the Comprehensive Environmental Response, Compensation & Liability Act, passed back in 1980, which was aimed at helping identify and remediate contaminated sites throughout the United States.

Naturally, you want to know what this is going to cost.

More than likely, it will only be a couple thousand dollars. You should think of it as insurance. And, in fact, it is just that.  If you would like a free phase 1 consultation then maybe you should check out that link.

It’s a cost of doing business – simple due diligence. You wouldn’t even consider purchasing property without doing a whole host of other investigations – researching the title for example. Those other risks pale in comparison to the possibility that you might discover after it’s too late that your new property is contaminated with one or more hazardous substances or some petroleum product.

Besides, the chances are slimmer and slimmer you can skip the cost of an environmental site assessment altogether. Lenders have to protect their self-interest, too, so yours will probably require you to complete this evaluation before they agree to a loan. Ask about their specific environmental policies, because some banks may stipulate a scope for your assessment that’s broader than the minimum.

The cost of avoiding the environmental site assessment could be catastrophic.

You could be formally listed as a Potential Responsible Party, making you legally liable – perhaps in conjunction with others – for the costs of cleaning up any contamination. That’s always expensive, not to mention time-consuming and fraught with governmental oversight and paperwork. Those costs may not show on your P&L, but they’ll certainly take you away from your core business, whatever that is.

You could wind up with a piece of property you can’t use. A real estate albatross. Whatever plans you had will go on hold. You’ll have acquired another headache instead of a savvy investment.

Instead, you want to qualify as an “innocent landowner” – a designation that sets aside responsibility for remediation or potential fines if contamination is discovered at some point later on.

Cutting corners on an environmental site assessment is ill-advised.

The exact amount you’ll have to pay depends on exactly what you have done, the size of the parcel in question, presence of structures on the property, etc. There’s actually a certain amount of leeway within the mandate to perform “all appropriate inquiry,” but you get what you pay for.

You can barely cover the required basics, or make sure historical research is exhaustive, to uncover even the most remote possibility of trouble. How good an insurance policy do you want? A Phase 1 environmental site assessment doesn’t necessarily include sampling and testing soil and water. Testing can increase your costs, but a reputable, scientifically knowledgeable investigator will know whether it’s warranted or not.

Consider the qualifications of the consultant you hire to perform the work. There’s leeway there, too, but the stronger the qualifications of your investigative team, the more confident you can be in the results.

It’s always good to consider costs. But you want to make a decision that will be the most comprehensively cost-effective. The assessment only takes two or three weeks, so it’s time and money well spent to ensure your future peace of mind.

What’s the worst thing that could happen?

With luck, your prospective property will get a clean bill of health. Or it might have some relatively minor problems that can be readily addressed. You’re good to move ahead with your purchase. But if the environmental site assessment indicates serious contamination problems, you can back out of the purchase unharmed. What a relief!

Now or later, it’s your money.