Commercial Real Estate Tips:Get an Environmental Assessment Before You Buy

Purchasing a property is usually the biggest investment we will make in our lifetime, and making the wrong decision can turn a happy experience into a living hell.  Most of us are aware of the need to conduct a real estate appraisal before buying to determine the true value of the property, but did you know that an environmental assessment could be even more important?

environmental assessment

Purchasing a property that has environmental contamination issues will quickly spiral into an expensive nightmare that could even amount to more than the value of the property itself.  It is essential that potential buyers familiarize themselves with the three phases of an environmental assessment, and are fully aware of the implications of taking responsibility for environmental remediation.

Regardless of the location and history of the property you are considering, it is always necessary to conduct an environmental assessment.  Even if you are sure that there could be no potential hazards, it is better to avoid any nasty surprises such as underground storage tanks or hidden asbestos.  Phase one of an environmental assessment is mainly to determine whether or not it is necessary to proceed with a phase two assessment.

Inspectors will examine the property and surrounding areas to check for any potential contamination of the soil, air, and water.  They will take into account the property’s proximity to hazards such as fuel stations, industrial estates, and nuclear power stations, and may speak to local environmental agencies to learn the site’s history and previous function.

If the first assessment raises any red flags, an environmental expert will recommend proceeding with a phase two assessment.   A phase two assessment will involve taking samples of the soil and water and testing them to determine the level of contamination, and these tests will often cost upwards of $10.000 to perform.

At this point it is up to you to decide whether or not you wish to continue with the purchase of the property, or get out as quickly as possible. Depending on the level of contamination the cost of remediation could be staggering. Simple contaminations such as a small amount of asbestos or mold may be fairly simple to remove, but discovering that the soil is contaminated with radon could end up costing millions of dollars to fix.

The introduction of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 states that as the new owner you will be responsible for all costs involved in removing the contamination, regardless of when it happened and by what means.

Phase three of an environmental assessment is known as environmental remediation and is the process of removing harmful contaminants from the site.  This is an extremely regulated process, and usually a slow and expensive one.  The site may have to be completely excavated, or treated using one of the more modern methods such as surfactant enhanced aquifer remediation, in situ oxidation, or soil vapor extraction.

If you decide to proceed with environmental remediation you must be fully aware of the time and money it will take to complete, and also be prepared for any extra costs along the way.  Purchasing commercial real estate can be a gamble, but performing the correct procedures beforehand will substantially lower the risk to you and your finances.

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