The Role of an Environmental Site Assessor.
Environmental Due Diligence is an important consideration for lender and borrower alike. We are joined by Larry Backman, Executive Vice President National Accounts, Environmental Due Diligence & Remediation, Pinchin Ltd., for expert insight into this important topic.
YPLP: Lets get right to basics Larry. Why is it important for a borrower to obtain a Phase 1 Environmental Site Assessment?
LB: In my opinion it is crucial for the borrower to get a PH I ESA completed. It provides a snap shot of the environmental condition of the property. In my twenty six years in this business, too often have I seen unsuspecting borrowers get stuck with a large clean-up cost from a former gas station, dry cleaner, etc. that was on the Site or in the vicinity. That would have been discovered during the completion of a PH I ESA;
What does a typical report look like?
YPLP: What might a typical report reveal? Is it typically a pass/fail conclusion?
LB: When a PH I ESA report is completed in accordance with the Canadian Standards Association Z768-01 (“CSA”), the conclusion must stipulate either that no further work is required, or a PH II Environmental Site Assessment (“PH II ESA”) is warranted;
How do Phase I and Phase II studies differ?
YPLP: What is the fundamental difference between a Phase 1 study and a Phase 2 study?
LB: A PH I ESA is a desk top review of information coupled with a Site visit. A PH II ESA employs investigative techniques such as drilling rigs, etc. to test the soil and groundwater conditions in the subsurface;
YPLP: What is a Record of Site Conditions, and why is this important?
LB: A Record of Site Condition (“RSC”), is a document that must be signed off by a Qualified professional. This is when a Site is re-developed for example from an industrial usage to a more stringent residential usage;
YPLP: Can an existing, or prospective property owner, and commercial mortgage borrower insure against the risk of property contamination?
LB: Yes, there are Insurance options in the market place to cover environmental impairment insurance, but often they can be costly;
Is a contaminated property impossible to finance?
YPLP: From your experience, if a property has identifiable contamination, is it consequently impossible to finance?
LB: Earlier on in my career, environmental contamination was a dirty word. Banks/Financial Institutions would be less likely to finance an asset. However, with the changing times, and through education lenders are less concerned. They often finance properties with contamination, albeit conditions are well defined;
YPLP: When you are engaged to undertake an environmental assessment on a property, are you typically working for the lender, or the proposed/existing owner?, or both?
LB: We are often engaged by the owner, financial institution or the prospective purchaser;
YPLP: Pinchin is known for its high quality environmental due diligence expertise. You also undertake property condition assessments as well. Why?
LB: Over the past 10 years, faulty roofs, building envelope issues, etc. have become more costly items to deal with over the term of the mortgage, much like leaking underground storage tanks have been;
What should I be looking for when hiring an environmental assessment firm?
YPLP: When hiring an environmental assessment firm, what should a potential client look for? What questions should they be asking?
LB: Always check with the Financial Institution that the consultant is on their approved list, and make sure they adhere to the CSA Z768-01 guidelines for completing PH I ESA’s;
Thank you for your professional advice Larry. READ MORE here, about Pinchin Ltd’s Environmental Due Diligence services.