4C — September 15 - 28, 2017 — Pennsylvania — M id A tlantic
Real Estate Journal
www.marejournal.com
P ennsylvania By Elizabeth Schamberger, P.G., Moonstone Environmental Phase I ESA FAQs
A
nyone who has been involved with a com- mercial real estate
but there’s usually a feeling that they are an unnecessary cost, and sometimes they seem
lenders (like national banks) tend to require them as stan- dard policy on all loans, but smaller lenders (like regional banks) often have more lati- tude to consider properties on a case-by-case basis and determine whether a Phase I ESA is warranted. Some institutions also have a loan threshold below which they do not require a Phase I (for example, for a loan less than $1 million). Why do banks require them for sites that are obviously not contaminated? Because contamination is
not always obvious. Site use changes over time, and past uses that created environ- mental impairments may look innocuous now. Today’s playground may have been a junkyard in the 1950s. Farm fields that have never been developed may have been or- chards in the past (resulting in possible arsenic and lead contamination from pesti- cides). The families buying homes at Love Canal certainly had no reason to expect that they were buying homes on top of an industrial chemical dump. This gets to the heart of why lenders require Phase I ESAs: because the land is their collateral, and if the land is more of a liability than an asset, it’s not good collateral. QUESTION: The ASTM Standard says a Phase I ESA is intended to help satisfy the requirements for landowner liability protections under the Comprehensive Environ- mental Response, Com- pensation and Liabili- ty Act (CERCLA, a.k.a. Superfund), so why do I need one for my property, which is clearly not a Su- perfund site? ANSWER: The answer comes in the first sentence of the stated purpose of ASTM E1527-13: the standard is meant to “define good commer- cial and customary practice... for conducting an environ- mental site assessment” for CERCLA-regulated contami- nants and petroleum products. In other words, the Phase I process is good for CERCLA liability, but also good for understanding the environ- mental liabilities of any com- mercial parcel based on its historical and current uses, so it has become the gener- ally accepted practice for due diligence. Performing a Phase I ESA before you buy a property should be viewed not as a burden, but as a relatively cheap insurance policy against unexpected (and potentially large) remediation costs in the future. If something is found, you may end up thanking your lender for requiring the assessment. Elizabeth Schamberg- er, P.G. is a professional geologist andS owner of Moonstone Environmental, LLC. n
QUESTION : Why do lend- ers require a Phase I ESA on every transaction, even
transaction knows about Phase I re- ports, those pesky envi- r o nme n t a l site assess- ments (ESAs) that have to be completed dur ing the
Performing a Phase I ESA before you buy a property should be viewed not as a burden, but as a relatively cheap insurance policy against unexpected (and potentially large) remediation costs in the future. If something is found, you may end up thanking your lender for requiring the assessment.
Elizabeth Schamberger
like overkill. So, why are they required so often? Here are some answers that may help you and your clients feel better about the process.
when the property is obvi- ously not contaminated? ANSWER: Actually, not all lenders require a Phase I. The larger, more heavily regulated
due diligence period. Most people do them because they are required by the lender,
Outstanding service through responsiveness, timeliness, and flexibility.
1150 Glenlivet Dr., Suite A-23 Allentown, PA 18016 Phone 484.664.7171 www.moonstoneenviro.com
Phase I ESAs Phase II ESAs
o Soil Sampling o Sediment Sampling o Soil gas sampling o Monitoring well installation
o Groundwater sampling o Surface water sampling o Hydrologic/hydrogeologic evaluation o Contaminant transport analysis o Underground storage tanks (USTs) o Statewide Health, Site Specific, or Background standards o Special Industrial Areas
Pennsylvania Act 2 Reports
Third-party Document Review o Buyer-Seller Agreements
o Environmental insurance policies o Environmental reports Asbestos Surveys Project Management and Oversight
Serving eastern and central Pennsylvania
Made with FlippingBook flipbook maker