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.
An Phase I Environmental Site Assessment (Phase I ESA) and Environmental Transaction Screen (ETS) is an investigation into a property's current use and its historic use. For example, was the property a dry cleaner or gas station in the 1940s and was there any documented chemical spills. The purpose of the Phase I ESA is to determine potential hazardous chemicals and/or petroleum impacts to the property. The difference between the Phase I ESA and the ETS is that the Phase I ESA incorporates information on the adjacent / surrounding properties; however, the ETS does not, as it only focuses on the subject property. Both investigations require physical site inspections. If an environmental risk is identified, it would likely be categorized into one of the concerns below:
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.