Phase I Environmental Site Assessment Process. Is It by Law? Who Pays? Buyer? Seller?

May 11, 2021

Environmental Enlightenment #324

This leter opens with a disclaimer that the writer does not practice law, has never practiced law and does not aim to provided legal advice of any kind. It aims to respond on two questions that we get asked frequently and are posted in the caption above.

Where it comes to transactions in commercial and industrial real estate, we are not aware of a law, national or local, that requires buyers or sellers or any other stakeholders to perform the Phase I Environmental Site Assessment (Phase I) Process.

This process is good commercial practice and customarily done in accordance with Standard Practice E1527-13 issued by the American Society for Testing and Metrials (ASTM). The practice is voluntary and its employ is subject to agreements between multiple parties that hold stakes in the transaction and the environmental professional that is retained for its production.

As to the party that initiates demand for that practice, it can be a seller, buyer, lender, tenant, property manager, urban development agency…anyone. The employment of this process is generally negotiable between the stakeholders. It has been our experience that the party who contracted and paid for it was generally the one who reaped the better return… “knowledge is power…” said the old adage.

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