Understand Timing of Phase 1 Environmental Assessment Report

Just when you think you are ready to buy or sell there is always “one more thing.”  Over recent decades, getting a Phase 1 environmental report completed has become the norm when buying and selling commercial property.


This process is obviously a protection for all parties.  Buyers and lenders simply need to know if a property may have any contamination that needs to be remediated, as the price of doing the remediation can become substantial. In addition, if you’re a property owner and you’re planning on selling your property, you may want to get a Phase 1 report done before you ever put your property on the market, especially if you suspect that the property may be contaminated; then you know what you are going to need to do.  Real estate surprises are rarely good ones.


If you’re the seller get a report done in advance:  In these situations, if a Phase 1 report indicates that a more detailed study of the property is warranted, including potentially getting soil samples and then testing them for contamination, this can cause a buyer to begin losing interest in your property very quickly. In addition, if soil samples indicate that remediation is now necessary, the buyer can really begin worrying that there may still be more contamination on the property that the Phase 2 investigation will not discover.


Contrast this instead with you now getting a Phase 1 report before you ever put your property on the market for sale. If a Phase 2 report and soil analysis are then warranted, you can remediate everything before you ever put the property on the market, and you’ll now have the environmental closure report to show to any potential buyer. This will give the buyer a much better feeling about now moving forward with the transaction—a feeling that any contamination that had previously existed has now been remediated, making it now much safer to move forward and purchase the property.


If you are a “landlord”:  Do you have concerns a tenant might do environmental damage to your property?  In this situation, getting a Phase 1 report before the tenant moves in could give you something to lean on if the report indicates that everything should be OK environmentally with the property, and then after the tenant moves out, you then discover that the property has environmental problems. In these situations, the tenant will argue that the contamination existed before they ever took possession of the property, and you’re going to need to prove otherwise.


So when you’re an owner, there are situations when being proactive and getting a Phase 1 environmental report done, when you’re not already in the middle of a sale transaction, can definitely benefit you.

Alex Rhoten is a principal broker at Coldwell Banker Commercial Mountain West Real Estate. or 503-587-4777