For any key real estate transactions to move forward, they must have a Phase I Environmental Site Assessment (ESA), which is a comprehensive investigation into the environmental condition and potential liabilities associated with the specific property. A Phase I Assessment is a key component of the due diligence process in real estate transactions and development projects.

To ensure that the Phase I ESA serves its purpose right, it’s important to understand its key definition and the critical components that comprise it.

 

The Purpose of Phase I ESA is to identify recognized environmental conditions (RECs) to ascertain the presence or likely presence of any hazardous substances or petroleum products on a property due to any release or threatened release.

This is critical for assessing the potential for environmental liability and risk associated with the property.

The Scope of Phase I ESA is usually multi-faceted, including:

• Undertaking a review of records to gather information about the property's history and past/current uses.

• Conducting a site reconnaissance to visually inspect the property for signs of contamination or environmental concerns.

• Conducting interviews with key personnel, such as the property owner, occupants, local government officials, neighborhood associations, if applicable, and other key stakeholders.

• Conducting a review of regulatory databases to identify any known contamination, spills, or environmental violations associated with the property or surrounding area.​

 

Key Deliverables of Phase I ESA include a detailed report documenting the findings of the Phase I ESA, as well as any identified RECs and recommendations for further investigation (Phase II ESA) or remedial action, if necessary.

Applicable Standards and Regulations for Phase I ESA
Phase I ESA should be conducted in accordance with the ASTM E1527 standard, which defines the requirements and protocols for conducting a Phase I ESA.
Phase I ESA helps establish the "innocent landowner defense" under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to limit potential liability for environmental contamination.
The Phase I ESA is a crucial step in the real estate due diligence process, as it provides stakeholders (buyers, lenders, developers) with critical information about the environmental condition of a property, allowing stakeholders to make informed decisions and manage potential risks, as well as take steps that protect their interests and investments.