If you are planning to invest in a commercial property then you better be careful. There is a lot at stake. Firstly, since you are investing in a real estate market the property valuation is exposed to constant change. To top it, there are other threats related to loan terms, property completion timeline, and tenants. However, another major risk involved is related to Environmental Liability. If not checked adequately, it can lead to major financial loss as you may not get possession of the property or even if you do you cannot rent it out.
Here are 5 reasons why you must check on the Environmental Site Assessment before signing on the dotted line.
# Federal Liability Protection: CERCLA stands for Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund. As per this act, a buyer can be protected from federal liabilities of CERCLA if they had taken adequate due diligence. Ideally, a prospective buyer must undergo a Phase I ESA to ascertain the risk
# Risk from Prior Business: When you are buying a commercial property, there will always be a risk from the prior business held there. Like if you have bought land for a restaurant and if the plot was earlier the location for a gas station then this is a huge business risk. The best way to mitigate same would be through a proper Phase I ESA. You can take help of reputed companies like Groupe Ortam to help you uncover these historical risks.
# Lender Requirements: You also need to check if Phase I ESA is required on the property you are interested or not. You will be surprised to know that not all properties need to undergo this. Generally, only those where a lender is involved, this requirement crops up. The lender wants to mitigate future risk by doing adequate due diligence.
# Future Requirement: It is prudent to undergo an Environmental Site Assessment, as in the future when you plan to sell the property or rent or lease it, you might need the same.
# Be Ready for unforeseen circumstances: Remember that nothing is beyond repair. In case, in spite of due diligence, still, some contamination is found at your plot then you will need expert help to come out of the tight spot. It might be time-consuming, but it is possible.
So all this makes it really important to have an environmental site assessment as it adds value to your property.