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PART 3 OF 3 SERIES - HOW TO PROTECT YOURSELF

Updated: Mar 5

If you’ve followed along for our three-part series, you’ve probably been asking yourself: how can I protect myself? Well, here are a few recommendations.


First and foremost, the Phase I ESA must comply with All Appropriate Inquiries[TC1]  requirements for Environmental Professional (EP) inquiry to protect against CERCLA liability. What can you do to make this happen?


  1. Define the Subject Property boundary and all parcels involved in the transaction. It is helpful to include this information in a visual exhibit in addition to a legal description.

  2. Make sure that the Phase I ESA is completed prior to the purchase of the property.

  3. Provide sufficient time in the closing schedule to allow the consultant to prepare a complete assessment, allowing sufficient time for file reviews and responses from environmental regulatory agencies.

  4. Ensure that the environmental consultant hired to complete the Phase I ESA has the appropriate experience. A local experienced environmental attorney is a good reference source for selecting a qualified environmental consultant. However, be cautious in hiring an environmental consultant who has prepared a Phase I for another party, and who may have a conflict of interest.

  5. Review the consultant’s Phase I proposal scope of work to ensure completeness in conformance with the ASTM E1527-21 standard and its sufficiency in meeting your environmental risk management objectives. This may include adding non-scope/business risk elements, such as asbestos, lead based paint, mold, or other inspections or tasks.

  6. Understand and fulfill User Responsibilities as defined in ASTM E1526-21 (look for our future blog addressing User Responsibilities).

  7. If you do not have a long-term working relationship with your environmental consultant, have concerns regarding the findings and conclusions, or doubts about the completeness of the Phase I, a draft report should have independent verification (technical review by a knowledgeable party, such as experienced environmental consultant or environmental attorney) to assess the completeness of the report, the components relative to the contract requirements, the technical interpretations of Phase I data, and the soundness of the conclusions. The entire report should be reviewed in detail, including appendices, to identify “missing,” “incomplete,” or “misinterpreted” components.

  8. Also, engage an experienced environmental attorney when potentially significant environmental issues are identified.

Controlling the consultant’s Phase I Agreement Terms and Conditions is important. Often, the level of protection offered to a client in an agreement is highly dependent on the party that drafts the agreement. Therefore, one of the best approaches for controlling risk and maintaining accountability of the consultant to meet industry standard requirements is to be the author of the agreement with the consultant for the Phase I work. This allows you to be in the driver’s seat with the most control. Rather than accepting the agreement provided by the consultant, a protective agreement can be drafted with the help of your environmental attorney for the consultant to sign. If you elect to use the consultant’s agreement, it is important to read all the fine print.  In such cases, we recommend the agreement terms and conditions be carefully reviewed by your attorney and negotiated to mutually acceptable terms prior to signing. Insurance coverage and certificate requirements are recommended to be outlined in the agreement, and the consultant should be required to provide proof that all the insurance requirements are met (including professional and asbestos coverage, additional insured language, waiver of subrogation, etc.) prior to the start of the work. The draft and final reports should be subject to technical review and the payment terms should be acceptable. It is also suggested that the final payment be due upon the client’s acceptance of the final report.


A Purchase and Sales Agreement (PSA) with the seller can also provide protection to the extent that it is successfully negotiated. The intent of a PSA defines each party’s end goal and documents the terms to which each party has agreed. A few items that should be addressed in the PSA include compliance with all state, local, and federal environmental laws, environmental disclosures (past uses, a history of any permits, violations, documentation of hazardous material, etc.), access provisions, and a closing schedule that allows time for a Phase II investigations, if recommended in the Phase I ESA (look for future blogs discussing Phase II investigations). An experienced environmental attorney is recommended to be consulted regarding environmental provisions to be included in the PSA and related negotiations.


This blog series has provided some helpful tools and tips to those involved in commercial real estate transactions. When it comes to environmental due diligence, remember that in order to lay your head down at night with peace of mind, the knowledge and experience of a reputable environmental consultant can be invaluable!

Liabilities and Common Deviations.

 

This post was authored by Lisa Viviano and Tracy Cooper, Environmental Project Managers at Environmental Advisors and Engineers, Inc. For further inquiry, please contact us at info@eaei.com.

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