In this third post of EBI’s series on property issues outside typical scopes, we discuss the benefits prospective or current property owners can see when performing thorough due diligence on their property.
In our current series, the EBI Blog has discussed CERCLA laws and contaminants of emerging concern. This post focuses on the importance of testing that falls outside of the usual ASTM scope and why this “extra” testing can have positive financial and economic repercussions, whether you’re buying, refinancing, or renovating an existing property.
As far as due diligence goes, lenders typically require at least a Phase I Environmental Site Assessment (ESA) prior to disbursing a loan. However, the ASTM standard for a Phase I does not account for dozens of hazardous materials commonly found in the United States. Buyers and property owners are strongly encouraged to engage in “non-scope testing”: testing for substances not covered under CERCLA or a traditional Phase I. Knowing whether a property is contaminated makes it easier for property owners to avoid certain liabilities and health concerns, and determine the best course of action.
Why Take Action?
Owning property comes with both fiscal and health safety responsibilities. When tenants occupy a building, they have the right to a safe environment. Some common hazards to watch for are asbestos, radon, and lead. All of these can be detected by environmental professionals and dealt with appropriately. If dealt with right off the bat, future risks are often lowered. Below, we look at a few of these more common issues.
As discussed in the asbestos blog series, exposure to this particular contaminant can lead to asbestosis, lung cancers such as mesothelioma, and potential lawsuits. Asbestos is a naturally-occurring substance and more prevalent in coastal states and states with high populations. It was originally used to protect individuals from fire-related injuries in the construction, automotive, and manufacturing industries, to name a few. Given its fire-resistant qualities, it did protect workers, but also caused life-threatening illnesses. Studies show that asbestos exposure has permanent effects, and health risks do not decrease from lowered exposure. Older buildings have a higher likelihood of asbestos dust in the air, insulation, walls, or soil. Buildings or locations that previously housed factories or mines also have a higher chance of asbestos exposure, as do those in the area.[i] [ii]
Radon, a known carcinogen, is more prevalent among northern states and is another naturally-occurring contaminant with a presence on every continent.[iii] Radon has no smell or color, which makes it extremely difficult to detect, and is also why consultants and health organizations (including the CDC, American Lung Association, and American Medical Association) strongly encourage testing. The health risks associated with radon are serious: radon is currently the second leading cause of lung cancer in the US. Even with the significant decrease in smoking over the last few decades, lung cancer rates remain high, and steps to prevent radon exposure should help over time.[iv]
Conducting testing outside typical scopes can also identify high levels of lead on a property. Lead contamination can be overlooked in some cases, as lead-based paint was eliminated in 1980 via a government ban. However, any building constructed prior to 1978 has a 24% chance of lead contamination, and older buildings have even higher likelihoods of contamination.
Even if owners paint over lead-based paint with lead-free paint, there is still cause for concern if the paint chips or peels. Lead can also be released into the air during renovations and harm construction workers, future tenants or other tenants and stick around in surrounding dust or soil. Lesser known issues with lead contamination can be found in properties with a history of automotive use, construction, or shooting ranges from not just lead-based paint, but bullets and casings.[v]
When to Take Action
Testing for hazardous substances that fall outside the scope of a typical Phase I ESA is recommended and encouraged for certain property types. Knowing the air, soil, and structure conditions of any property helps owners avoid potential lawsuits and damages. More importantly, more extensive due diligence helps ensure the safety of residents, employees, construction workers, and others on or around the property.
The benefits of non-scope testing extend beyond safety hazards. They can also affect re-trade value of a property in the acquisition process. In a re-trade, a buyer can leverage information gained in the due diligence process to conduct negotiations. This usually occurs when a prospective buyer or investor comes across issues with air quality, asbestos, or mold, as well as other system issues.[vi]
If you are purchasing, refinancing, or investing in one or multiple properties, EBI’s highly experienced scientists can customize a service solution to address your concerns. A clean report can diminish concerns and put property owners at ease.