If the question is “Do I need a Phase I Environmental Assessment on vacant land?”, then the answer is “Not necessarily” but if the question is, “Do I need some kind of environmental assessment on vacant land?”, then the answer is almost certainly yes. You have options though and all the options have pro’s and con’s. Our goal beyond this point is to make you an educated consumer.
First off, it never hurts to talk with an environmental professional. You can get a ton of information by calling and asking a million questions. Start by writing down the questions before you call us so you cover all the bases. The answers we give will most likely spur other questions and it’s easy to get distracted from the original set of questions you had.
Be suspicious of vacant land in a city, town or surrounded by commercial uses.
If you are contemplating buying vacant land and if it is zoned commercial, is in a city, town or is surrounded by commercial or industrial uses you most certainly need some kind of environmental assessment, most likely a full Phase I Environmental Assessment.
Vacant land in an urban or suburban area should be a screaming red flag that something is going on with the property you should be concerned about. Vacant land in cities can mean whatever was there in the past burned down, or otherwise contaminated the soil so badly that the property has been leveled. Oftentimes the property stays vacant for decades to the point nobody remembers what was there before. For amateur investors and all-cash-buyers vacant land in a city can draw vast amounts of attention. You should double your suspicion if the price is low or the property is on the corner of two or more streets. Vacant corner properties are the hallmark of former gas stations.
Be suspicious of parking lots in cities, parking lots qualify as “vacant” in commercial real estate terms.
Any property used as a parking lot in a city, regardless if it is pay-to-park or is part of the parcel for a bigger building should be considered suspicious. Parking is a low value use in a city compared to a multi-floor building. In the environmental consulting field we wonder why and how a parking lot became a parking lot and what was there before. Was it a building that got knocked down? Why was the building knocked down?
Be less suspicious of vacant land surrounded by residential property or agriculture.
Because of zoning laws, local governments typically separate residential real estate and commercial areas. Residential uses for property and agricultural uses are lower risk from an environmental standpoint. They are not without risk at all though. The older the neighborhood, the more concern you should have and agricultural fields frequently are used for both automotive junkyards and unregulated landfills. Farmers in the past were notorious for filling in low spots and ravines on their land with junk. If you look at the vacant property you are interested in purchasing from google earth and see it surrounded by gravel or sand quarries or ravines, and your property is mysteriously level or even hilly, you should be suspicious.
Now you know the environmental risk you are taking, what should you do?
There are a handful of environmental due diligence options to mitigate the financial risk you are taking when buying investment property.
Phase I Environmental Assessment (EA)– This is the option most are familiar with. They cost around $2,000 are completed in 10 business days and offer a level of protection from the environmental liability of buying a contaminated property. On the pro side, they are the best protection against environmental risk and are a form of legal protection. On the con side, they are the most expensive form of environmental due diligence. However, you’re risking a lot of money, right? Do you really want to cheap out? Only you know the answer to that.
Transaction Screen Assessment (TSA) – A TSA is like a Record Search with Risk Assessment (RSRA), only with a site-site visit by an environmental professional. Prices for these are $1200 depending on property type and location. They are also completed in 10 business days. What’s a RSRA? Glad you asked…
Record Search with Risk Assessment (RSRA) – A RSRA starts with an environmental questionnaire. We then review all the Federal, State, County and Municipal database entries for anyone who used, transported, or generated hazardous materials in a ¼ radius. We also query at least one kind of historical record source such as City Directories (yellow pages), fire insurance maps or historic aerials.
These are official reports designed by the Small Business Administration (SBA) for use with SBA lenders as a form of less expensive environmental due diligence. Typically RSRA reports cost $850. They give you a binary answer of “High Risk or Low Risk”. High risk results to the RSRA mean you need to continue on and complete a Phase I ESA but we discount the price so you only wind up paying once for the environmental assessment (ESA).
The pros to this kind of report are the much lower price than a Phase I Environmental Site Assessment. The con is that it does not limit your liability. It’s a lighter search than a Phase I and the potential that something gets missed is a real concern.
Environmental Screens (ES) – Rounding out the suite of environmental due diligence products is the environmental screen. These also go by the names; Environmental Desktop Review and Environmental Radius Search. These are high level, fast turn reports that give commercial investors insight into the property they are contemplating buying. They cost $150 and are done in 24 to 48 hours.
If you need a Phase I Environmental Assessment on your property or one you are interested in purchasing, give A3 Environmental Consultants a call. We’ll work to get your Environmental REC removed with the utmost in confidentiality, we’ll meet or exceed ASTM Standard E1527-13 on any sort of commercial or industrial property. Our reports meet the requirements of all lenders and government agencies such as the Small Business Administration (SBA), Housing and Urban Development (HUD) and the United States Department of Agriculture (USDA). A3 Environmental Consultants can be reached at (888) 405-1742 or by email at Info@A3E.com.
