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Area Development

Environmental Due Diligence: Timing is Everything

Nov 07
As a manager or professional in charge of site selection, you are no doubt aware of the necessary environmental due diligence steps that must be taken prior to purchasing a new property. However, it might be of interest for you to consider the proper amount of time that should be allotted to each phase of the process. The information that follows below will provide you with such a timeline, so that you will be able to complete your property acquisition in an environmentally thorough and timely manner.

As you know, the goal of environmental due diligence is to identify potential areas of concern and to quantify the costs and timeframe potentially needed for remediation. The following tips outline the environmental process in property transactions as well as the appropriate time necessary to complete each step.

• First, determine which type of due diligence needs to be completed. An ASTM Phase I Environmental Assessment is generally conducted for financial institutions. However, many financial institutions have their own scope and/or additional requirements. This initial process usually takes between one and three weeks to complete.

• Next, choose an environmental consultant to complete the due diligence. Banks typically have approved lists of environmental consultants. On the other hand, if you are conducting due diligence for a regulatory agency, your best bet is to work with environmental consultants who have the necessary experience and qualifications in that state. One way to determine who is best qualified to perform this assessment is to request a statement of qualifications, or SOQ, from the environmental company. This document will allow you to evaluate the company's strengths and experience. The selection process should take a maximum of two to three weeks.

• If the Phase I Environmental Site Assessment determines that recognized environmental conditions exist, then a Phase II is required. At this point an extension of the contractual due diligence period may be necessary. The Phase II Investigation determines through sampling whether identified historic onsite or offsite hazardous uses have impacted the soil and/or groundwater conditions under a property. The primary goal of the Phase II is to quantify the extent of the cleanup by predicting a range of costs for the property's remediation. This report can take anywhere from several weeks to several months to complete, depending upon the complexities encountered at the site.

• It is then necessary to notify all parties that are involved in the potential transaction and negotiate the next appropriate course of action. Of course, all negotiated agreements must comply with current environmental law. Allow two to three weeks for the negotiation process.

The entire environmental due diligence process can take anywhere from three weeks to several months to be completed. Accordingly, you must factor in considerable time before completing the sale to ensure complete compliance and remediation in accordance with all regulations.

John Brennan is president of Brennan Environmental, Inc. (BEI), an environmental consulting firm in Summit, New Jersey, with substantive experience in the assessment and remediation of all environmental contamination issues. Contact him through the company's website at www.bei-env.com.

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