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What Is A Phase 2 And Why Do I Need It For My Property?

Frequently, during the course of the sale and/or development of property the parties with conduct what is called a "Phase 1" on the property. Almost all banks require a "Phase 1" prior to loaning on the purchase of commercial property. In the simplest terms, a Phase 1 simply looks at the historical uses of the property and surrounding properties to identify where or not there is any risk that there is contamination underlying the property. Accordingly, even if the property at issue doesn't have any historical use that could lead to contamination, if the neighboring properties had uses and/or have discovered contamination, then the Phase 1 simply reports back that there is a possibility for contamination underlying the property. Normally, the purchaser/bank in a transaction and/or property developer will then be faced with the need to perform a "Phase 2" on a property. A "Phase 2" generally screens the property to see if actual contamination is present. Typically, an initial "Phase 2" will not tell you how much contamination is present, how widespread the contamination is nor supply enough information to estimate the cost of cleanup. In sum, the "Phase 2" just provides the information as to whether contamination is present or not in the samples taken. The cost of preparing a "Phase 2" can as little as a couple of thousand dollars to substantially more money. Even the cost estimates to prepare a "Phase 2" between different environmental consulting firms can substantially vary by thousands of dollars for the same basis work. Finally, if contamination is discovered by the Phase 2, there may be reporting requirements and additional work required. Accordingly, for the average layperson, the process can be very confusing, costly and intimidating.

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