The Commercial Real Estate Informational Portal

Welcome to

Welcome to the Commercial Real Estate Expert Blog! A host of industry leading real estate professionals, lawyers, and consultants providing the latest in real estate relevant news and advice.

If the Phase 1 Environmental Site Assessment is used for the purpose of measuring business risk 99% of the time, and the Phase 1 is used to qualify a buyer for the Innocent Landowner defense under CERCLA one percent of the time, then the ASTM standard should be changed to reflect its use.  

Many commercial real estate lenders, understanding this nuance, will have one scope of work for the loan underwriting process that for lack of a better word could be called a Business-Risk Phase 1 Environmental Site Assessment, while maintaining a separate scope of work for Pre-Foreclosure Phase 1 Environmental Site Assessments.   Often the Pre-Foreclosure Phase 1s are 100% compliant with the EPA’s All Appropriate Inquiry Rule in order to qualify for the Innocent Landowner defense under CERCLA.   I find this to be a fine approach, but for arguments sake I ask: is environmental liability CERCLA liability?   Or does environmental liability take another form: reduced real estate value in the market, state regulatory action that is non-CERCLA driven, or third party non-CERCLA lawsuit?

My point is that ASTM spends too much time on CERCLA and the Innocent Landowner defense.   How would the Phase 1 Environmental Site Assessment change if we spent less time worrying about CERCLA?   Maybe not much, but I think we would rethink a couple scope items.  For example, the Environmental Lien Search is a scope item that in my opinion does not yield enough value to justify the cost.

Happy Holidays,
Joe Derhake, PE