We discuss how long a Phase I ESA is "good" for, and when it "expires".
For many folks out there looking into buying or refinancing a piece of property, a Phase I ESA isn't just a good idea, it's a vital piece of information necessary in determining you (or your bank) are making a sound financial decision. The strange thing is, when folks are looking to invest hundreds of thousands to millions of dollars into a property, or the business that occupies it, many don't consider a Phase I ESA a worthy investment. In fact, many folks look to either hire the cheapest consultant they can find, or even worse, attempt to use an old Phase I report. One of the most common questions our customers ask us is how long is a Phase I ESA good for?
I won't go into detail about why you should avoid a cheap Phase I Environmental Site Assessment since I've already covered it in length in another article, but I do want to discuss how long a report is good for. This is an issue I see a lot with folks, especially if they've looked into a site multiple times, or are being given a report from someone who looked into the site earlier.
We often times hear things like "We're going to be buying a property from Company XYZ, and their attorney provided us with a Phase I. So we don't need another one, right?" Invariably, when we ask the date of the prior Phase I (the date is not the only reason you don't want to use someone else's report), the answer is usually either "I don't know", or "lemme see.....it's from a few years back".
What many people don't realize is that a Phase I has a sort of "expiration" date, and after a certain point it's no longer valid or usable.
How long is a Phase I Environmental Site Assessment good for?
Here's the short answer, and I'll explain more below.
A Phase I is good for 6 months. After 6 months, the Phase I needs to be comprehensivly updated. One year after the initial report date, the Phase I is no longer valid.
Wondering why? Let's explain.
I'm really tempted to include my high school graduation picture right now. Remember back in the day when long, feathery hair was "cool", and now only appears tragically out of date? Suppose I tried to pull my old picture off as being representative of me. Or even a picture from 5 years ago. It's still good, right? Do you think that would fly with the DMV or the TSA?
No, you need a current, updated picture, because things change, and the picture doesn't represent the current situation anymore. It's no different with a Phase I ESA, because things can change. Compared to the relatively slow rate that my hairline receded, environmental conditions can change at your site quickly.
For example, suppose one month after that old Phase I was completed the current buyer started operating on the site and a big spill of petroleum or some other chemical occurred. Conversely, suppose the old Phase I was completed to current standards. ASTM E1527-13 is the current standard, with the 13 meaning 2013. As you can likely guess, that means that Phase I reports completed before 2013 were completed referencing an older standard, meaning that old report won't cut it anymore.
The point is, old reports are just that - old and outdated, and not representative of the current situation at all.
But does that really make that much of a difference? I mean, I still have hair and look like that old picture, so what's the big deal? The standards haven't changed that much, have they? A Phase I should still more or less cover the same thing, right?
That's not the case at all. The reason you're getting a Phase I is to limit or avoid your liability for contamination from past or prior use of the site under the applicable Federal regulation called CERCLA (Comprehensive Environmental Responsibility and Cleanup Liability Act). In order to do this, you need to do your environmental due diligence, which in this case is a Phase I ESA.
Fail to do it, and you can very well be held responsible for past contamination of the site, regardless of whether or not you're responsible for it. As you can imagine, that can be extremely expensive.
The Federal government didn't want to write regulations dictating how a Phase I must be done, so they let ASTM handle that task, and said if ASTM standards are followed, then it's a valid Phase I and qualifies for certain liability protections. In other words, to protect yourself, your Phase I has to follow current ASTM standards.
ASTM Standards state how long a Phase I ESA is good for.
The ASTM standards are a little complex to sift through, but when it comes to how long a Phase I is good for, it's pretty cut & dry.
The ASTM standard states that a Phase I Environmental Site Assessment which was completed less than 180 days prior to the date of acquisition of the subject property is presumed to be valid. Between 180 days and one year, the Phase I needs to be updated fairly comprehensively. Beyond one year, and the Phase I is no longer presumed to be valid.
To summarize, a Phase I is good for 6 months. After 6 months, it needs a comprehensive update. After one year, it's no longer valid.
Any older than that, and the report most likely won't accurately reflect site conditions and activities. Conditions can change quickly, and a lot of environmental damage can occur over the course of 1 year.
I mentioned above using the old Phase I given to you by the buyer's attorney, which is something we've seen happen a lot. That's kind of like buying a used car off of someone, and they give you an old report from their mechanic from a couple of years ago attesting that the car is okay.
Would you buy that car based off the information you're given? Of course not! So why would you settle for it in a transaction of this magnitude and potential liability? Bottom line? If it's a Phase I older than 1 year, it's ancient history, and you'll need a new one.