Environmental Due Diligence For Commercial Real Estate

“Due diligence” is a common enough term in nearly any industry or endeavor. But when applied to the purchase of commercial properties, the term “due diligence” can mean something drastically different. 

When searching for a family home, prospective buyers generally hire appraisers. Buyers of commercial properties have many of the same concerns. But where there’s industry, there may also be environmental issues creating liability, cleanup responsibilities, and other financial hardship. 

Here’s what you need to know about environmental due diligence when shopping around for your commercial property.

Why do I need environmental due diligence?

Prior to 1973, many of the environmental regulations we have today didn’t exist. Manufacturers, small businesses, and others disposed of potentially harmful substances however they liked. To make matters trickier, it can be difficult to tell (some 50 years after the fact) what kind of business used to operate on a commercial lot or how they disposed of their waste. 

When shopping around for commercial property, you could find the perfect spot without knowing anything about its industrial past or environmental fitness. And if you were to buy a contaminated lot, you could find yourself on the hook for cleanup costs, liability claims from nearby communities, and much more.

How do I perform due diligence?

Since 1973, regulatory bodies have been steadily addressing environmental due diligence for new property owners. Through decades of case law, precedent, and regulatory change, it’s now much easier to determine liability and clear the way for new owners to confidently purchase commercial property. The market may still be governed by a “buyer beware” attitude. But thankfully, you’re far from powerless.

Environmental due diligence requires that a buyer make “all appropriate inquiries” into the environmental condition of a commercial property. This boils down to doing your utmost to guarantee that the property is clean and safe. 

What are “all appropriate inquiries?”

Bluntly defined, “all appropriate inquiries” can mean searching through government records, interviewing past owners/operators, or even canvassing the area for information about the property. Mostly, though, all appropriate inquiries include environmental assessments performed by professionals.

An environmental professional is key to any assessment. But like other terms, defining an environmental professional is somewhat open-ended. Some firms (such as PPM Consultants) can perform environmental assessments on your behalf. The most important thing is that your chosen environmental professional has the experience and overall credentials necessary to qualify as such. In fact, to prove their credentials, your chosen professional will have to include a resume along with any assessment they perform. 

How much do environmental assessments cost?

Because one site may be larger or more highly contaminated than another, it’s difficult to put a price tag on assessments as a whole. Complicating matters further, there are several stages of environmental assessment. 

Phase I assessments can generally determine the environmental status of a commercial property, though additional phases may be required. Phase I assessments can cost as little as $3,000 or as much as $20,000+ depending on the circumstances. 

Phase II assessments, meanwhile, may set a property shopper back by the tune of $9,000-$30,000. Again, without knowing the specific rigors of any given site, it’s difficult to determine average cost. What we can say, however, is that without a thorough assessment, you may be paying considerably more than you paid for a property assessment to clean up a property after the fact. 

Don’t leave it up to chance

A lot has changed since the environmental wild west of 1973. Nowadays, protections exist for commercial property owners so long as they’ve performed all appropriate inquiries as part of a plan for due diligence. Those protections won’t include you if you buy a site without an assessment, leaving you to pay for the mistakes of past owners. 

To give your new venture the best chance at success, trust the environmental professionals at PPM Consultants for your due diligence. Our team of experts has the credentials to demonstrate a thorough site assessment and the know-how to advise you on next steps. 

Let us make all appropriate inquiries for your commercial property!

PPM Consultants keeps its thumb on the pulse of local, state, and federal environmental regulation throughout the nation. We can help you find local incentives, perform environmental assessments, and assist you in making all appropriate inquiries so that you’re not left holding the bag for industrial carelessness of the past. To learn more, call 1-800-945-4834 or contact us here