A quality Phase I Environmental Site Assessment is like an insurance policy. It gives you a snapshot of what a commercial property looks like at the time that the Phase I is conducted, and it offers real liability protection. As the industry standard for performing due diligence, the Phase I can help protect you from private lawsuits, as well as actions from State and Federal agencies.
Regarding private lawsuits, it’s just a fact that anyone can bring a lawsuit against you for anything. Being the industry standard, the Phase I will offer the best defense for the condition of a property at the time of purchase.
In regard to State and Federal agencies, Phase I offers protection that is built into the regulations. The Phase I can be used to show that you didn’t know, and had no reason to know, about a release (or threat of a release) of hazardous substances or petroleum products. Also, it can be used to show that you aren’t potentially liable for a release caused by someone else.
It comes down to a cost/benefit analysis. Many banks will require a Phase I for properties that are valued above a certain dollar amount. In those instances, the costs are small in comparison to the value of the property and the loan. For properties with low value, often banks will perform transactions screens. They have a lower cost but don’t offer the same legal and liability protection.
Every property is unique and has a distinct history. Speak with an Environmental Professional to learn more about the process and to determine what risk level is most comfortable for you.