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Lyman J. (Greg) Gregory, III



90 Southside Avenue,

Ste 100

Asheville, NC 28801

90 Southside Avenue Suite 100


90 Southside Avenue Suite 100

A Legal Moment

Phase I Environmetal Site Assessments


        In commercial real estate transactions one line item required by a lending institution is a Phase I Environmental Site Assessment.  To most agents and buyers, a Phase I ESA is simply another line item that needs to be completed in order to fund the transaction.  Others believe that a favorable Phase I report is a complete environmental "clean bill of health."  In reality, a Phase I ESA is more than, and less than, either extreme.

        The purpose of a Phase I report is to identify "Recognized Environmental Conditions" (RECs) on a subject property.  Identified RECs shield the buyer from any environmental agency litigation to clean up what previous owners or adjacent landlowners left behind.  The primary reason for requiring a Phase I is to provide the "innocent landowner defense" concerning environmental issues on the property.

        A properly performed Phase I is the result of site visits, records reviews, and interviews with property owners and governmental officials to determine current and past uses of the property and neighboring properties.  The reporting standards are established by the Environmental Protection Agency and rely primarily on a procedure developed by the American Society for Testing and Materials (ASTM) in Standard E1527-05.

        The most common sources of contamination include above-ground and underground storage tanks (i.e. gas stations and home heating fuel), chemical storage and/or spills (dry cleaners), or heavy pesticide use (farms/orchards).  But there are many potentially hazardous conditions which do not fall within the scope of a Phase I.  These conditions include: asbestos, lead-based paint, lead in drinking water, mold, radon, and mercury poisoning.

        A "clean" Phase I report does not necessarily mean there are no environmental conditions affecting the property.  The report is merely the opinion of the Environmental Professional (EP) who as performed a reasonable investigation of the property.  Any actual recommendations concerning the environmental conditions affecting the property are beyond the scope of the report.  It is always best to work with a qualified and experienced EP when a Phase I ESA is required in your real estate transaction.



Many thanks to Dan March, M.S. EnEng. (Pisgah Environmental Services ( and Steve Hornaday, Phase I contractor ( for guest writing our Legal Moment this month.



Do not hesitate to contact me to receive more information on this topic or to suggest topics for future editions of 'A Legal Moment'. You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.

Marshall, Roth & Gregory, P.C. • 90 Southside Avenue Suite 100 • Asheville, NC 28801
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