Phase I Environmental Surveys

A Phase I environmental survey is a visual survey designed to disclose to a prospective purchaser some of the environmental risks associated with a building purchase.  Phase I environmental surveys are often required by banks before they will grant a mortgage on commercial properties.  The banks are concerned that past environmental problems have contaminated the property, and want to be sure there are no environmental liabilities associated with the property before they grant a mortgage.

Phase I environmental surveys are generally not required on residential properties, nor are they commonly performed on residential properties of fewer than four families.  If a house was never used for commercial purposes, there is probably little reason to have a Phase I environmental survey.

Most Phase I environmental surveys are conducted according to standards set forth by the American Society for Testing and Materials (ASTM).  Requirements include a visual survey of the site, a visual survey of the surrounding sites, and searches of federal, state, and local databases.  Because a Phase I environmental survey is a visual survey, underground problems will usually not be detected unless they have been recorded in some environmental database.

If you buy a building, you also buy the environmental problems associated with the building.  You are responsible for the site's environmental cleanup even if you did not contaminate the site. This is why many banks require Phase I environmental surveys.  Phase I surveys reveal problems such as:

• Asbestos-containing materials
• Lead-based paints
• Radon gas
• Waste disposal facilities
• Proximity to sensitive areas
• PCB-containing materials
• Fuel or solvent contamination
• Buried fuel storage tanks
• Contamination from prior use

A Phase I environmental survey is different from and supplemental to a pre-purchase engineering inspection.  First, have an Engineer inspect the building.  If the pre-purchase engineering inspection does not reveal any serious defects, then you should arrange for a Phase I environmental survey.

Even if you are buying the property without getting a bank mortgage, you should have a Phase I environmental survey completed for the site.  You will probably sell the property some day.  When you sell the property, the buyer will probably have a Phase I survey, which may find problems.  If you are not diligent prior to your purchase of the site, you may be held responsible for the site cleanup, even if the contamination had been caused by a previous owner or tenant.  Extensive environmental problems may reduce property values and jeopardize any future sales of the site.

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