Phase 1 Environmental Assessment
A Phase 1 Environmental Assessment (ESA) evaluates a property for potential environmental contamination. It is essential for property transactions, ensuring due diligence for lenders and buyers. The assessment identifies environmental risks, helping determine property value and safety.
Importance of Phase 1 Environmental Site Assessments
This blog assumes that the reader is aware of what a Phase 1 Site Assessment is. If not, visit our website for more details. In summary, while purchasing any sort of property or land, environmental due diligence in the form of phase one environmental is usually required by the lender for mortgage approval. A purchaser may also require it during any property transactions. The purpose is to find if there is any possibility of contamination at the site. This helps determine the value of the property and if it is a safe investment.
Validity and Expiration of Phase 1 Environmental Reports
Sometimes property owners or buyers see Environmental Site Assessments (ESA) as an unnecessary extra expense and try to use an expired Phase I Assessment to obtain mortgage approval.
How Long Is a Phase 1 Environmental Report Valid?
According to the Canadian Standards Association (CSA), the reports are valid for one year or twelve months from the date of the final report. If the report is outside the twelve-month period, it may not be accepted by the lender and will be considered to be expired. However, this may not be the end of the world. If you contact the report owner – as in the consultant who conducted the investigation in the first place-, they might do a limited investigation for a quarter of the price and time to update the report accordingly. Updating a report is much cheaper than conducting a brand-new Phase I from a different consultant. In some cases, if your ESA consultant has been a part of your project (like managing your project), all you would require is a sign off in the form of a letter that suggests that the ESA Phase I that was conducted is still valid. Please note that the expiration time frame of each type of ESA may vary depending on the type of work and location. For example, a Phase 2 Environmental Site Assessment is valid for a different amount of time.
Also Read: Guide for Completing the Phase 1 Environmental Site Assessment for your business
Why Conducting a Phase 1 Environmental Site Assessment Is Crucial
It is important to realize that environmental site assessments aren’t legal barriers. Instead of trying to find loopholes to overcome the requirement of Phase I, it is always better to spend the money on a Phase I than spend the money on cleaning up contaminations. The costs associated with environmental remediation are significantly more than Phase I. It can also pose significant risks to the environment and people’s lives. These reports are a vital piece of information needed to make an informed decision regarding the subject property. If you fail to conduct a Phase I ESA, you can be held responsible for contamination that occurred even before you purchased the property.
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Phase 1 ESA Validity: Predicting Property Viability
Phase I Environmental Site Assessments do not predict the future of the property. It is environmental due diligence to examine the viability of the property at the time of the investigation. Therefore, they have an expiration date. Even if the Phase I ESA found no Recognized Environmental Conditions (REC’s) a year ago at the property, there’s no guarantee that the subject site still has no contaminants presently. Any work that was done after the investigation for the subject property and it’s immediate surroundings can be subject to examination. Along with that, the CSA standards needed to conduct a Phase I can change after a certain period of time. The same standards that were used to conduct the first Phase I may be different from the ones that are required in the present day. Therefore, if you try to use an old Phase I, it will be obsolete for future use.
Exceptions to Repeating a Phase 1 Environmental Site Assessment
There are rare occasions where a second Phase I may not be needed. For example, if you have a continuous working relationship with your lender because they are aware of all the activities that take place on the site, it is possible that they make an exception. Phase I ESA’s are conducted to reduce any existing risks. If the previous Phase I just expired, and not many high-risk activities have taken place, your lender may give you a pass. Chances are your lender will be familiar with the industry of your work, and the report has to have expired recently. The likelihood of an exception occurring is very minimal and requires specific circumstances. However, the liabilities associated with making that exception will be carried by you and the lender.
Also Read: A Phase 1 Environmental Site Assessment Cost Estimator
Conclusion: Benefits of Updating Phase 1 Environmental Reports
In conclusion, it is always cheaper to update a Phase I than deal with the consequences of skipping it. An update may be required if contamination did occur after new activities were conducted. In America, as a simple rule, a Phase 1 ESA is actually valid for six months to a year. Similarly, missing the twelve-month mark in Canada is usually taken seriously by lenders, and an update is required more often than not.
Pinaaz Rahman
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