A Phase 1 site assessment, formally a Phase I Environmental Site Assessment (ESA), is the report that tells you whether a commercial property carries environmental risk before you are committed to buy it. It takes five steps: set it up inside your due diligence window, review the records, visit the site and interview people, evaluate what turned up, and use the report to decide. The assessment looks and asks. It does not sample soil or water.
Why a Phase 1 Site Assessment Comes Before Closing
You cannot see underground, and contamination stays with the property when it changes hands. An environmental site assessment tells you what is likely there while you can still renegotiate or walk away. The contract’s due diligence period is the escape hatch, and our guide to environmental due diligence explains why. Lenders including the SBA, HUD and USDA typically require one before financing.
The assessment follows ASTM Standard E1527-21. It also supports the EPA’s All Appropriate Inquiries (AAI) process. If you want federal liability protection under CERCLA as an Innocent Landowner, Contiguous Property Owner or Bona Fide Prospective Purchaser, the assessment has to meet AAI.
The 5 Steps of a Phase 1 Site Assessment
Step 1: Order it inside your due diligence window
All of your due diligence runs at the same time, often inside about 30 days between signing the purchase contract and closing. The environmental report is the one most likely to change the deal, so start it first. At A3 Environmental Consultants (A3E) our fastest turnaround is 5 business days and our normal turn is 10 business days. People call us at the last minute all the time, and that costs them room to negotiate. Give the consultant the address, the property type and your contract deadline. Who pays for the Phase 1, buyer or seller, is worth settling before you order.
Step 2: Review the records
The consultant searches federal, state, county and municipal environmental databases and reviews the property’s history: past owners and uses, deeds, site plans, building permits and any earlier environmental reports. Records requests to local government under the Freedom of Information Act (FOIA) fill the gaps the databases leave. A third-party data vendor supplies the database search, see what an environmental database report (EDR) contains. Underground storage tanks, hazardous materials and prior industrial uses are what this step looks for.
Step 3: Visit the site and talk to people
An environmental professional walks the property and looks at the buildings, storage areas, drains, stains and neighboring uses, and interviews current and past owners or occupants. The visit is visual. Phase 1 does not include testing, which belongs to Phase 2. For a worked example, see our rush Phase I ESA on an industrial facility.
Step 4: Evaluate the findings
The consultant weighs the records, the site visit and the interviews, and identifies Recognized Environmental Conditions (RECs). A REC is evidence of a release or likely release of hazardous substances at the property. If there are none, the question is closed. If there are, the usual next move is a Phase II ESA, where samples of soil or groundwater are collected and tested.
Step 5: Read the report and decide
The written report states the findings, the RECs and the consultant’s recommendations. Review it with your lawyer and lender before the due diligence period ends. If RECs were found, a buyer can ask the seller to remediate before closing, adjust the price or walk away. If the report is clean, you close with a record that supports your liability protection.
What a Phase 1 Site Assessment Costs and What You Get
A Phase 1 ESA typically costs between $2,200 and $4,000. Standard commercial properties fall at the low end, and former industrial sites or properties with long histories cost more. You receive a written report that meets ASTM E1527-21. Our reports meet the requirements of lenders and government agencies such as the SBA, HUD and USDA. For the price drivers, read our guide to the cost of a Phase I environmental assessment.
Where This Fits in the Buying Process
The assessment is one part of buying a commercial property, next to legal, financial and physical review, and local rules vary, so use advisors who know the property’s jurisdiction. If you are new to the topic, our environmental site assessment beginner’s guide for CRE covers the basics. To see how we work with brokers and buyers, read how A3E helps CRE professionals close more deals.
Assets Not Liabilities
Frequently Asked Questions
What is a Phase 1 site assessment?
It is a Phase I Environmental Site Assessment: a records review, site visit and interviews that identify likely contamination at a property, done to ASTM E1527-21. It does not include sampling.
How long does a Phase 1 site assessment take?
At A3E the normal turnaround is 10 business days and the fastest is 5 business days. Order it early in your due diligence period.
Is a Phase 1 ESA required to buy commercial property?
No law requires the buyer to order one, but lenders including the SBA, HUD and USDA typically require it before financing. It is also how a buyer meets All Appropriate Inquiries for CERCLA liability protection.
Does a Phase 1 test the soil or water?
No. A Phase 1 does not test. If it finds a REC, a Phase II ESA collects and tests samples.
A3E project fingerprint
- Project: Phase I ESA on an abandoned plastic manufacturing plant headed to auction (2021)
- City: Rantoul, Illinois
- Coordinates: 40.3084°N, 88.1559°W
Buying commercial property? A3E can start your Phase 1 site assessment now. Request a quote or call us at (888) 405-1742.
Reviewed by Dave McCoy, P.G., Director of Operations, A3 Environmental Consultants.
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