What Happens when Contamination isn’t Identified in a Phase I?

What Happens when Contamination isn’t Identified in a Phase I?

California specifies the requirements and protocol for Phase I environmental site assessments in ASTM E1527 but even with the process outlined in detail, sometimes information is missed and a contaminated property is transferred from a seller to a buyer.  There are horror stories of Phase I consultants missing information about historic oil wells, past property uses, or offsite sources that contaminate a property and the consequences are devastating.  A property can be sold as clean at full retail value to a developer, and then when grading the lot, a historic oil well is discovered.  The developer is now responsible for abandoning the oil well and remediating oil-affected soil and groundwater.  Or a commercial building may be sold and no one realized a dry cleaner next door created a soil vapor plume of PCE that makes the new building uninhabitable because of PCE in indoor air.  Or a property is sold that is a florist now but historically was a laundry that used PCE or TCE and these solvents have migrated in groundwater beneath the residential houses next door.  The new property owner is responsible for the liability of the cleanup and effects on neighboring properties.  When a Phase I report fails to identify contamination, lawsuits result. The Phase I consultants carry general and professional liability insurance but sometimes claims can exceed their limits, or policies don’t pay if the consultant is found negligent.  And consultants may limit their liability to the cost of the investigation which is less than $5,000.  With the average cost of remediating a contaminated property at $500,000 or more, it is a certainty that lawsuits will result as new owners look for cost recovery.  Realtors can help guard their clients by reading the Phase I contracts for limits of liability, getting certificates of additionally insured for themselves and their clients, ensuring that Phase I investigations comply with ASTM standards, and using reputable Phase I consultants.

Leave a Reply

Your email address will not be published.