Key conclusion: A non-specific or incomplete Phase 2 investigation can uncover contamination from an unidentified source which could be off-site.
The finding could permanently damage an owner’s property and open up all parties to significant legal liability. Poorly researched and implemented Phase 1 projects can often lead to poorly justified Phase 2’s.
Poor language in Phase 1 reports have been discussed previously in ERAS newsletters, Feb, 2008, Aug 2009, Sept 2011.
A Phase 2 investigation designed to randomly search for unknown contamination in unjustified locations can have disastrous results. All involved parties in a sale could be affected in the following ways:
- Detection of unknown contamination could lead to further recommendations for additional expensive investigation;
- Any detected chemical may require the consultant and owner to report a leak to a regulatory agency;
- The owner of the Property could end up with a disclosure problem that could render their Property no longer marketable;
- Contamination of the Property, even if minor, and possibly from off-site sources could entangle the owner in environmental regulatory requirements for expensive investigation and/or remediation.
Are bankers, brokers and buyers potentially responsible for destruction of an owner’s property value? Be very certain you know the objectives and potential effects of a P-2 investigation before setting the environmental consultant loose.
ERAS recommends that bankers, who require Phase 2 investigations, notify the parties involved they may not lend on a property if contamination is found.
All involved parties should insist their environmental consultant declare and identify the consequences of detection at the Property of any specific contaminant in the specific locations being investigated.