Due Diligence on Due Diligence

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Concerns regarding the vast differences in the quality, depth and reliability of Phase I Environmental Site Assessments performed by consultants have resulted in modifications to the American Society for Testing and Materials (ASTM) Standard Practice for Phase I Environmental Site Assessments (ESAs). The new “standard,” ASTM E1527-05, was finalized to dovetail with 2002 changes in the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) that took effect in 2006. Many do not understand that neither the new, nor the old “standards” were designed to address all environmental concerns. The 2005 upgrade has resulted in two basic options for Phase I ESAs: one to meet the “standard” and one with a broader scope that better addresses “environmental business risk.” Even with all the changes, industry frustration remains high since many clients don’t understand the needs and the differences. This article’s original intent was to explain the recent changes, but in development it quickly became obvious a review of the entire process was in order. Unfortunately, to most real estate professionals, the grasp of environmental issues still lands somewhere between a necessary evil and the dreaded environmental financial black hole. Industry frustration is split between understanding the “standard” and the varying level of consultants’ performance. Our goal in this article is to help the real estate professional do due diligence on his or her due diligence process to provide a better understanding of what you need for a specific transaction. This includes understanding the update and the various environmental screening tools available as well as understanding the differences in environmental consulting firms and consultants. This article will not make you an expert, but it will hopefully help you better evaluate screening options and select expertise when picking your due diligence team.
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Cornell Real Estate Review
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Vol. 6
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Cornell; real estate; Environmental Site Assessments; ESA; Compensation and Liability Act; Phase I; American Society for Testing and Materials; ASTM; Scope of Work; contractors; consultant; qualifications; risk; requirements; insurance policy; closing; professional; negotation
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Required Publisher Statement: © Cornell University. Reprinted with permission. All rights reserved.
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