Environmental Due Diligence
MEI offers several environmental due diligence options to protect your commercial real estate purchase. We help the client identify and evaluate potential and know environmental risks associated with their property / prospective property (subject property) or risk from off-site environmental sites. The evaluation consists of a comprehensive historic review of the subject property and surrounding area, and a government records review of environmental sites and databases on or near the property under consideration, the subject property.
A Phase I Environmental Site Assessment (Phase I ESA) is normally purchased as part of a commercial real estate transaction, usually sought by the bank or sometimes by the prospective buyer. The purpose of this assessment is to evaluate the potential environmental risk or condition of a property and to identify potential contamination which may impact the value of the property.
At MEI, an Environmental Professional (EP) completes the assessment by ordering sufficient information used to develop an opinion on risk to the property. Normally the research information includes historical records of the property dating back to the early 1900's, sometimes earlier. To complete the historical research, we order historic aerial photographs, city directory information, Sanborn Fire Insurance Maps, topographic maps, and a Physical Setting Report. The Phase I assessment will also include a regulatory records database review and discussion. The database provides information (if any available) for the property connected to environmental records that may be on file; some of which include, petroleum and/or hazardous chemical storage and/or use, registered underground and above-ground fuel tanks, spills or cleanup actions that may have happened on the property. These are to name a few, however, we research multiple databases not only for the subject property, but also for listings connected to adjoining properties, properties within 500 feet, and up to a mile for federal listings. The research includes State, County, and Federal databases.
In addition, MEI will conduct interviews with local officials, and property owners, key contacts, managers, etc - in order to gain more environmental knowledge of the property to better formulate an opinion. The local building inspection department and fire department, or any local, county, or federal department the EP finds useful, may be contacted for available environmental or building records on file for the property.
This assessment will also include a physical site inspection of the property. The inspections last normally 30 - 90 minutes and includes visual observations and photographs of the entire property - all interior and exterior locations where possible. The EP will look for potential environmental issues; some of the significant issues could include, underground storage tanks, major interior or exterior staining attributed to chemicals and/or petroleum product; drinking water wells, dry wells, sumps, chemical inventory, petroleum inventory, disposal practices, on-site fill and/or dumping, general house keeping practices with petroleum products and/or hazardous chemicals.
A Phase I Environmental Site Assessment Report is prepared.
The Phase I Environmental Site Assessment will likely conclude with No Further Assessment or with one of the following conditions:
Recognized Environmental Condition (REC) - defined by ASTM as “(1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment."
Historic Recognized Environmental Condition (HREC) - defined by ASTM as “a previous release of hazardous substances or petroleum products affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities and meeting unrestricted use criteria established by the applicable regulatory authority or authorities without subjecting the subject property to any controls.”
Controlled Recognized Environmental Condition (CREC) - defined by ASTM as “a recognized environmental condition affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place subject to implementation of required controls (for example, activity and use limitations or other property use limitations)."
Business Environmental Risk (BER) - defined by ASTM as a “risk that can have a material environmental or environmentally-driven impact on the business associated with the current or planned use of commercial real estate, not necessarily related to those environmental issues required to be investigated in this practice.”
De Minimis Condition - defined by ASTM as “a condition related to a release that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.”
Aside from Phase I Environmental Assessment Reports and Environmental Transaction Screens, MEI also offers Desktop due diligence reports. The Desktop report requires no physical site inspection. A Desktop report does not provide the same protections as a Phase I ESA, but is a quicker snapshot into the property history and current use.