Environmental site assessments (ESAs) are a vital part of due diligence in any commercial real estate transaction. These assessments help identify environmental risks, liabilities, and potential contamination concerns before closing a deal. While the basic idea of ESAs is well understood, a complete understanding can be a little more challenging because there are three different environmental assessment phases, each with distinct steps, goals, and requirements.
The Three Environmental Assessment Phases
The three types of ESAs are:- Phase I ESA
- Phase II ESA
- Phase III ESA
What’s an Environmental Condition Assessment?
An environmental condition assessment also known as an ESA is the evaluation of a property to determine whether there are existing or potential environmental concerns. Inspectors perform visual inspections, conduct interviews, and review documents and databases such as government or historical property records. These assessments are essential for:- Identifying prior uses of the site that may lead to contamination
- Determining if further sampling, investigation, or remediation is required
- Helping lenders, investors, and developers make informed decisions
Phase I ESA
The goal of a Phase I ESA is to identify Recognized Environmental Conditions (RECs) that may suggest the presence of hazardous materials. The process includes:- Reviewing property records and aerial photos
- On-site inspection and observation
- Conducting interviews with past or present property owners
- Reviewing state and government environmental databases
Phase II ESA
A Phase II ESA involves sampling and analysis. If the Phase I identifies potential risks, targeted soil, air, or groundwater samples are collected and sent to a laboratory for analysis. The goal is to:- Determine the presence of contamination
- Assess the extent of impact from hazardous materials (e.g., heavy metals, petroleum, chemicals)
- Establish whether further cleanup or a remediation plan is needed
Phase III ESA
A Phase III ESA also referred to as a remediation or cleanup plan is implemented when significant contamination is confirmed. This involves:- Removal or neutralization of contaminated soil, water, or materials
- Ongoing monitoring
- Full implementation of remediation plans
- Coordination with agencies for approval
Why Partner with RSB Environmental?
RSB Environmental brings decades of experience in environmental consulting and due diligence services. Our licensed professionals support property buyers, investors, and lenders across the U.S. by providing:- Turnkey inspection and reporting
- Environmental planning and risk management
- Detailed recommendations and remediation plans
- Assistance with agency coordination and compliance documentation
Frequently Asked Questions
What triggers the need for a Phase II ESA?
A Phase II ESA is triggered when a Phase I report identifies RECs, such as suspected contamination from past uses (e.g., chemical storage, dry cleaning). Phase II involves sampling and laboratory analysis to assess extent and severity.
Who typically requests an ESA?
Lenders, real estate developers, or property buyers often initiate ESAs as part of the due diligence process to avoid future liabilities and ensure compliance with environmental regulations.
Can mold or asbestos lead to a Phase III ESA?
Yes. If hazardous materials such as mold or asbestos are found and exceed safety levels, a remediation plan may be required under a Phase III ESA to ensure health and regulatory standards are met.
How do ESAs affect property financing?
Environmental issues can significantly delay or derail financing. A clean ESA report reassures lenders that the property is free from major environmental liabilities and eligible for loans or grants.
What are the most common contaminants found during ESAs?
Common findings include petroleum hydrocarbons, solvents, heavy metals, asbestos, lead-based paint, and mold. These substances are flagged during inspection, sampling, and analysis and may require a formal remediation plan.
