An Environmental Consultant Working on ASTM Recognized Environmental Conditions
Phase I ESA (Environmental Site Assessments) are a valuable tool for commercial real estate brokers. Phase I ESAs can help brokers determine the usability of a subject property, which will help protect your company and your client. Such reports are also useful for valuing a piece of commercial land to help structure a deal. However, there is a lot of information in a Phase I ESA. One of the most important components that you need to be aware of is called ASTM recognized environmental conditions or RECs. Let’s dive into RECs so that you can quickly find critical evidence about the condition of a given piece of property.What Are Recognized Environmental Conditions (RECs)?
Recognized Environmental Conditions (RECs) are site assessments that might be hazardous to the land or people. These conditions are alternatively referred to as recognized environmental concerns in some instances. RECs are defined by ASTM standard E1527-21. The definition has been in place since 2013. To be considered a REC, a material or piece of equipment must contain petroleum products or harmful compounds and have been released into the surface water, groundwater, or structures of the environment, be likely to be released in the future, or pose a material threat of future release. RECs can be present either above ground or underground. A few examples of above-ground RECs include:- 55-gallon drums
- Miscellaneous containers
- Pipes
- Spills
RECs and Phase 1 ESAs
Phase I ESAs are the primary means of discovering RECs. In fact, that is the main objective of this investigation. Phase I ESAs break down RECs into several categories, which include the following:1. REC
A general definition used to describe the presence of any petroleum product or hazardous substance. However, the ASTM standard E1527-21 breaks RECs down into sub-categories.2. CREC
CRECs are past activities or spills. These cases have been cleaned up in a manner consistent with relevant regulations and standards. There may still be use restrictions, but the new landowner will not have to take further action.3. HREC
HRECs are also past releases or spills. However, these have been cleaned up more thoroughly, with supporting documentation from government records or agencies. As a result, the land has no use restrictions.4. De Minimis Condition
De minimis conditions are other considerations that can be listed in an ESA. These are not RECs and should have no impact on a land’s usability.What’s the Most Important Part of a Phase I ESA?
The RECs and conditions listed above are key parts of a Phase I ESA. However, the most vital section for buyers or sellers is often the “Business Environmental Risk” (BER). BER includes risks that could affect interest, investment, or long-term implementation strategies. Assessors compare known RECs with the current or planned use of the parcel. If RECs affect that intended use, the discussion will be included in the BER section. For example, if your client plans to develop housing but the site has CRECs with limitations on residential use, additional remediation or negotiations may be necessary. The cost and time of remediation—often involving the removal of metals, solvents, or other contaminants—may affect buyer satisfaction and price expectations.What Should Brokers and Loan Officers Look for?
Professional brokers and loan officers should focus on specific components in the ESA:- Introduction
- RECs
- CRECs
- HRECs
- BER
- Summary
When Are Phase II ESAs Necessary?
When red flags appear in a Phase I ESA—such as indications of contaminants, petroleum products, or unresolved cleanup liens—a Phase II ESA is needed. This more in-depth investigation includes sampling, interviews, and even engineering studies to assess the extent of contamination. A Phase II ESA helps define the severity of contamination and offers a basis for estimating funds required for cleanup. These actions are especially important in transactions involving industrial or high-risk sites.Why Real Estate Professionals Need a Partner Like RSB Environmental
Partnering with RSB Environmental means having experienced authorities on your side. We understand laws, agencies, and environmental controls that affect due diligence and real estate transactions. Our team delivers professional evaluations, expert guidance, and actionable recommendations to help you and your clients make informed decisions. To learn more, contact us or sign up for our e-newsletter. We’ll send you exclusive resources on environmental compliance, risk mitigation, and site assessments.Frequently Asked Questions
What is the main purpose of a Phase I ESA?
The main purpose is to identify recognized environmental conditions (RECs) on a subject property, helping assess potential risks, liabilities, and the need for further investigation.
What types of substances are commonly identified in RECs?
Commonly identified materials include petroleum products, solvents, metals, and other harmful compounds found in surface water, groundwater, or soil.
Who performs a Phase I ESA, and what qualifications do they need?
A qualified environmental professional with relevant experience, credentials, and knowledge of applicable regulations and standards performs the assessment.
What happens if RECs are found on a property?
If RECs are identified, further action such as a Phase II ESA, sampling, or cleanup may be needed. This depends on the property’s use, the type of contamination, and agency requirements.
How do Phase I ESAs affect financing and real estate deals?
They provide lenders and investors with crucial evidence for due diligence, helping them understand environmental liabilities, make informed decisions, and determine whether to proceed with interest in the site.
