National Due Diligence Services is your go-to source for efficient and informative Environmental Site Assessments. Our highly experienced and trained staff members are here to help ensure your property is in accordance with ASTM standards so that you can feel confident with your property acquisitions. In this blog, we’re answering the question, ‘Who pays for a Phase 1 Environmental Site Assessment?’
Phase 1 Environmental Site Assessments are a crucial step when purchasing land to ensure the land is in accordance with the latest ASTM Standards. You may request these assessments to better understand the property’s history and identify any environmental contaminants that could affect the surrounding environment’s health or human health. This assessment is available for most property types, including but not limited to commercial or industrial use land lots, vacant land, agricultural lots, and residential land areas.
A common question associated with Phase 1 Environmental Site Assessments is “Who pays for it?” and the answer depends on the motivation of the requestor. There are three different parties who could be responsible for requesting this assessment: the lender, buyer, or seller. Deciding who requests the evaluation and who pays for it are all steps in the property deal and are up for negotiation among the parties involved.
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The Lender
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Lenders are the most frequent party to request a Phase 1 Environmental Site Assessment, and their primary motivation is to ensure their financial interest and security for the property. Larger lenders are typically well-versed in the ASTM Phase 1 Standard and industry best practices and will have a team of knowledgeable consultants to work with. The lender wants to ensure the property is free of contaminants that could lead to foreclosure, affecting the loan repayment process. While the lender initially pays for the Phase 1 Assessment, typically, the cost is included in the buyer’s closing costs if the deal is accepted and closed.
The Buyer
It’s common for a buyer to arrange a Phase I Environmental Site Assessment because the lender requires one first! If a buyer initiates this process, it’s usually when dealing with smaller, low-risk properties. If a lender is not involved, or they do not require the assessment – it’s beneficial for buyers to request the assessment to ensure they aren’t exposing themselves to potential risks when purchasing the property. If the buyer is arranging for this assessment, they may also order additional tests to look for other issues, such as PCBs in building materials or asbestos. Because these tests are not a part of the ASTM Standard for a Phase 1 Environmental Assessment, lenders don’t typically require them. Still, it’s beneficial to conduct them, as the presence of PCBs or asbestos could significantly impact the property in the future.
The Seller
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The seller’s primary motivation in ordering the Environmental Assessment is to make a property look more appealing to potential buyers. This may be more common when listing a higher-risk property, such as industrial properties, gas stations, manufacturing plants, and similar properties. These assessments would ensure the site is not a hotbed for hazardous containments leftover from any previous use.
When this assessment is conducted on these high-risk properties, assessors could find Recognized Environmental Conditions that will need additional testing, such as soil and groundwater testing. For smaller, low-risk properties, the buyers often don’t see the need to invest in these further tests, so the seller will conduct them to make the property look more attractive to potential buyers.
National Due Diligence Services is Here for You
If you are ready to start the Phase I Environmental Site Assessment process or have any questions, our team is on your side. We provide a professional and efficient service, from Phase I ESAs to Surveying, Property Condition Assessments as well as Zoning Reports. Speak with our team to discover how NDDS can help your business today.
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