Due diligence projects are subject to an array of regulations as well as professional standards of care and practice. State Registered Environmental Assessors (REA) are usually required for certification of projects (such as in California) or by the requirements of financial lending institutions.

ERAS is contacted from time to time by brokers and buyers who say “there is no bank involved”. It is implied that therefore, not as much due diligence is required. ERAS believes that due diligence may be even more important is these cases because there has been no screening of the report by bank trained reviewers.

There are American Society of Testing and Materials (ASTM) standards for due diligence projects as follows.

  1. Environmental Transaction Screens (ETS, sometimes referred to as Transaction Screen Analysis or TSA), ASTM 1528-06
  2. Environmental Site Assessment (ESA or Phase 1), ASTM 1527-05.

In addition, there is an Environmental Protection Agency (EPA) standard known as All Appropriate Inquiry (AAI) (40 CFR 312) finalized on November 1, 2005. Note the deadline for compliance with AAI was to be November 1, 2006. The EPA determined that a Phase 1 prepared in compliance with ASTM 1527-05 would meet the AAI requirements.

Above all, there is the Standard of Care and Practice for conducting due diligence that all parties, brokers, banks and consultants must adhere to in order to minimize financial and legal liability, both professional and personal.