Importance of Environmental Site Assessment
I am a relatively new land investor, and I recently learned that liability for past environmental issues can often fall on the current owner of a property. I am wondering how others deal with this risk, since I have heard the clean-up costs for these kind of issues can be astronomical. From what I have gathered, having an official Environmental Site Assessment done before purchasing a property can provide some protection, but the pricing on those can be several thousand dollars per property.
Has anyone ever had this kind of assessment done or been burned by not discovering an environmental issue before purchasing?
jawollbrink Jason Wollbrink last edited by
I simply filter industrial use properties off my list before mailing.
Alexandra Hurst I'm not an enviro expert, but I believe environmental site assessments are only necessary for commercial and industrial properties. If you're looking at residential property, most states don't have any requirements for testing and remediation... you literally don't even need to think about it for a residential property. So, if you're only looking at residential properties to flip, then don't worry about it.
On the other hand, if you are looking at commercial or industrial properties, then you'll probably want to do some very basic screening to make sure there are no red flags worth looking into. I believe one common test is called the RSRA (usually around $500 for this report), which is a simple pull of information from a computer. They don't look very deep and nobody visits the property with this test, but it just tells them if there are any clues that point to environmental problems.
If the RSRA indicates any potential problems, then you'll want to order a Phase I assessment (usually $1,000 or more). This is when the costs start getting significant and someone actually visits the property.
If the Phase I uncovers more potential problems, like old tanks or signs of contamination on the property, then you'll want to order a Phase II (usually a few thousand dollars for this one). This is where they actually take soil samples and test them to see if the soil has problems.
If the Phase II comes back with dirty soil, then you'll need a Baseline Environmental Assessment, aka - BEA (this can cost up to $10K, possibly more, depending on how bad the situation is), which gets very expensive and takes a lot of time, but the goal is to make sure the liability from the ground contamination stays with the previous owner and doesn't fall on the new owner's shoulders. Sometimes it will require a cleanup plan, and the previous owner will have to pay for cleanup, which involves removing contaminated soil and replacing it with clean soil (this happens a lot with old gas stations, for example).
I've heard these steps above can vary a bit from state to state, because not all states have the same environmental laws, but that should at least give you a basic idea for what the environmental journey looks like for the most contaminated properties.
And again, one big takeaway is, if you're dealing with a commercial or industrial property, just start with the RSRA and see what it says. If it doesn't indicate any problems (and in rural areas, it usually won't), then you're good to go. If it DOES indicate problems, then you'll have to decide if it's worth going down that rabbit trail, depending on how valuable the property is to you.
Charlotte Irwin Thank you for the super-detailed response, that's some very useful perspective on things. I am not looking to go after commercial or industrial properties, so it sounds like I shouldn't need to worry too much about it. I will do some additional research into my state's environmental laws as well just to see what I can find.