Pre-Purchase Due Diligence: Are you adequately screening for Business Environmental Risks along with your standard Phase I Environmental Site Assessment?

You’ve probably been through a Phase I with an environmental consultant before, and while it seems like a straightforward process, there are additional Business Environmental Risks (BER) that most property purchasers want to consider.

A BER is defined in ASTM 1527:13 as “a risk which can have a material environmental or environmentally-driven impact on the business associated with the current or planned use of commercial real estate.”

A standard Phase I does not evaluate BERs and treats these as out-of-scope items. So unless you specifically authorize additional review beyond the standard Phase I, you leave your transaction open to costly BER surprises.

These surprises can include that your newly-purchased property has asbestos-containing materials, mold, lead in drinking water, radon, or land use restrictions prohibiting future development such as the presence of wetlands, endangered species, or cultural and historic resources.

Industrial Property BERs

For our clients purchasing industrial properties with active facilities, there are additional BERs to consider. Operational compliance with air, stormwater, and wastewater regulations are an important consideration in the overall purchase price. For example, an inadequate stormwater treatment system or lapsed air permit can spell trouble in terms of fines or capital investment requirements for a new operator-owner. A pre-purchase review of needed permits to support a facility expansion or change of industrial activities is also critical to determining the investment value of the target property.

SoundEarth’s cross-functional due diligence team has deep understanding of compliance requirements for both operating and former industrial sites. Our team is available to help make sure that you get the critical BERs evaluated for your target property—before you seal the deal.

Common Business Environmental Risks

The list below identifies BERs that ASTM considers out-of-scope for Phase I ESAs.

– Asbestos-containing building materials

– Biological agents

– Cultural and historic resources

– Ecological resources

– Endangered species

– Health and safety

– Indoor air quality unrelated to releases of hazardous substances or petroleum products into the environment

– Industrial hygiene

– Lead-based paint

– Lead in drinking water

– Mold

– Radon

– Regulatory compliance

– Wetlands


Author: Annika Wallendahl

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