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Corporate Way Land (Little Rd. Lot)
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Why would my lender ask for an environmental study?


A Phase I Environmental Site Assessment (ESA) is conducted by an Environmental Professional to determine if “recognized environmental conditions” (RECs) exist in association with a property. A REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to any release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. The Phase I ESA provides an independent professional opinion about the environmental condition of the property and involves a review of regulatory and municipal records, historical land use records, a site inspection, and interviews with owners, occupants, neighbors and local government officials.

Other reasons include:

1.      The costs of remediation could impair the borrower’s ability to repay the loan and/or continue to operate the business;

2.      The value and marketability of the Property could be diminished. If the borrower defaults, lender or SBA might have to abandon the Property to avoid liability or accept a reduced price for the Property;

3.      Lender or SBA could be liable for environmental clean-up costs and third-party damage claims arising from contamination if title to contaminated Property is taken as a result of foreclosure proceedings and/or lender or SBA exercises operational control at the Property; and

4.      If a Governmental Entity cleans a site, it may be able to file a lien for recovery of its costs which may be superior to SBA’s lien.

Still can’t find the answers or tools you need?  Contact us and let our professional staff of experts help assist you in meeting your commercial real estate needs.