What is an Environmental Site Assessment?
2.3 min read
When making any significant investment decision, it is common to do your research beforehand. Why? To ensure you know all the facts, so there are no unpleasant surprises along the way. The same goes for commercial real estate transactions.
The best interest of your client should always remain top of mind. Investing in commercial real estate involves a thorough screening process to ensure the integrity of the property at hand. This process is called due diligence. Due diligence aims to thoroughly inspect all aspects of the property, including the seller, financing, and compliance obligations. Doing this will reduce uncertainties if and when your client acquires the property.
During the due diligence process, it is common to conduct an environmental site assessment (ESA) to determine the property's condition. An environmental site assessment identifies key environmental factors relating to the property, including the scope of soil or groundwater contamination and the presence of harmful building products such as asbestos or mould. If not done, this can affect the value of the property. To ensure the buyer's liability is limited, an ESA will determine whether contamination issues exist before buying.
A typical ESA consists of two phases. During the first phase, a visual, historical inspection is done on behalf of an environmental consultant. The consultant will look for any signs of contamination and pull records on the property to see usage over the years. During the second phase, soil sampling or other tests are done to understand better the condition of the land, groundwater and structures on the property.
When purchasing a commercial property, it is vital to account for a two-month window to ensure the due diligence process, including an environmental site assessment, is conducted thoroughly. This will provide a smooth transaction process for both you and your client.
Reference
Environmental site assessments – what you need to know. BDC.ca. (2022, June 8). Retrieved June 28, 2022, from https://www.bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/what-you-need-know-about-environmental-site-assessments#:~:text=An%20ESA%20will%20determine%20whether,President%2C%20Business%20Development%20at%20BDC.
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