Federal regulations do not require that a Phase I ESA be conducted on every commercial real estate transaction. However, CERCLA liability protection is only afforded when such assessments are initiated prior to the purchase of a property. Property use and history of use dictate whether or not a bank will require a Phase I ESA before offering a loan. If paying cash, a prospective buyer should also consider these same conditions in deciding to conduct a Phase I ESA. Since everyone’s risk tolerance is different, there are some gray areas. There are also some occasions where a Phase I ESA is clearly warranted.
A Phase I ESA should always be obtained if:
- The business sells, supplies, or dispenses fuel, gasoline, heating oil, and other hazardous materials.
- If there are actual or suspected hazardous substances on the property (or in the subsurface soil and/or groundwater), either from current, past, or future activities on the property itself, or current or past activities on surrounding properties.
- There is a known or potential threat to the environment or potential exceedance of any cleanup standard.
- There is an issue that has been, currently is, or will potentially become the subject of an enforcement action under Federal or state laws, especially cleanup-related and waste-related state laws.
