Environmental Site Assessments (ESAs) are vital due diligence tools that protect investments and ensure compliance with laws and regulations. When conducted professionally, ESAs can reduce risks while protecting property values; many lenders require this step before authorizing loans for commercial real estate purchases.

Phase 1 ESAs, commonly referred to as comprehensive initial environmental site assessments (CIESA), involve conducting an in-depth examination of real estate properties to detect any environmental risks that could threaten them. A professional environmental consultant conducts historical research and conducts a physical inspection. They may interview past and present occupants as well as owners of neighboring properties in addition to checking federal and local records to see if the property has ever been polluted in its past.

Environmental professionals use phase one ESA reports, which typically take up to one month, to provide an in-depth picture of a property and its history. They include any recognized environmental conditions (RECs) on site as well as recommendations for further testing such as phase 2 ESA if contamination is suspected or identified; all information gathered through phase 1 ESA surveys are then summarized and presented back to their client who requested them.

Commercial real estate investors can typically expect a Phase I Environmental Site Assessment to cost between $1,000 and $2,000 for single-story buildings and up to $12,000 or more for multifamily properties. This investment represents only a minor risk when considering potential liability that may come with purchasing a contaminated property.

An ESA of Phase I importance also meets CERCLA’s innocent landowner defense law, providing buyers and developers protection from contamination issues arising from past land uses. Without an effective Phase I ESA, buyers and developers face substantial financial liabilities and potential legal action.

Although some investors may be tempted to forego conducting a Phase 1 Environmental Site Assessment before embarking on a new development project, doing so is strongly discouraged. Should the site prove contaminated and require costly cleanup costs and opportunities lost. A polluted property could also pose safety hazards to employees, tenants and nearby residents who could come into contact with dangerous chemicals and contaminants that can expose them to potentially hazardous materials that lead to costly class action lawsuits demanding financial compensation for health concerns and property damages.