Source: https://alliedworldinsurance.com/, EnviroScope, September 2021

Consider this scenario: You are the lead sales broker on a large commercial real estate M&A transaction
and the deal’s primary lender has requested copies of Phase I Environmental Site Assessments (ESAs) for
the 80 properties in the portfolio as a precondition to issuing a loan commitment for financing the
transaction. In the final days leading up to the scheduled closing at the end of the month, you check with
the seller’s attorney who mentions that the latest Phase I ESAs for the properties were prepared around
15 years ago when the properties were first acquired and may no longer satisfy the ASTM E2790-20
Standard Guide for Identifying and Complying with Continuing Obligations and all appropriate inquiry and
innocent landowner liability protection requirements. This leaves ten business days to secure updated
Phase I ESAs, submit them to the bank and obtain the loan commitment. Further complicating this is the
possibility of the lender requiring a large escrow for several properties based on the historic presence of
unresolved Recognized Environmental Conditions (RECs) that several of the earlier Phase I ESAs identified.

Fortunately, another one of the firm’s brokers utilized an environmental consulting firm last year for a
similar transaction that has availability to complete updated Phase I ESAs and prepare the reports within
the upcoming week, but will require an inspection of the property despite being in the middle of a
pandemic. The firm also mentions that the prior Phase I ESAs for the properties by the seller no longer
fulfill the current ASTM minimum requirements (ASTM E1527-13) based on a number of changes to the
ASTM scope since the last reports were prepared. Read more.