Protect Your Investment with a Phase I Investigation

Protect Your Investment with a Phase I Investigation

If you are investing in commercial real estate, it is best to investigate its past uses before you buy.  Most banks and lenders require that a Phase I environmental site assessment is done to identify areas of potential contamination.  Then as potential threats are identified, a Phase II investigation of collecting soil and groundwater samples is performed.  But sometimes properties are bought and sold on a cash basis, or without a sophisticated lending institution, and the Phase I and II steps are not performed.  Sometimes the new buyer finds out the property is contaminated and when the buyer defaults, the investors are on the hook for the environmental work.  If no generator can be held accountable for generating their mess, then the property owner becomes the Responsible Party (RP) and is held financially responsible for the liability of the site.  It is best to do the Phase I and II upfront and know the condition of a property before closing the deal.