Environmental due diligence plays an important role in commercial real estate transactions, redevelopment projects, and property management decisions.
However, many environmental challenges are not caused by unusual site conditions or complex regulatory requirements. More often, they result from important questions not being asked early enough in the process.
The goal of environmental due diligence is not simply to obtain reports. The goal is to understand environmental risks well enough to make informed business decisions.
Here are five common environmental due diligence mistakes we encounter and practical ways to avoid them.
1. Treating the Phase I ESA as the Finish Line
A common misconception is that environmental due diligence ends once a Phase I Environmental Site Assessment is completed.
In reality, a Phase I ESA often identifies environmental conditions that warrant additional evaluation.
Examples may include:
- Former gas stations
- Historical dry cleaners
- Underground storage tanks
- Industrial operations
- Adjacent properties with environmental concerns
The purpose of a Phase I ESA is often to identify questions that may require further investigation, not necessarily to provide all the answers.
2. Waiting Until the End of the Due Diligence Period
Environmental investigations take time.
If a Phase I ESA identifies a Recognized Environmental Condition (REC), additional evaluation may be necessary before informed acquisition or redevelopment decisions can be made.
When environmental concerns are identified near the end of the due diligence period, project teams may find themselves trying to:
- Complete additional investigation
- Review laboratory results
- Evaluate regulatory implications
- Negotiate environmental responsibilities
all within a compressed timeframe.
Beginning environmental review early often provides greater flexibility and better decision-making opportunities.
3. Focusing Only on the Property and Ignoring Adjacent Properties
Environmental conditions do not always stop at property boundaries.
Examples may include:
- Adjacent dry cleaners
- Former gas stations
- Industrial facilities
- Area-wide groundwater contamination plumes
In some cases, environmental concerns identified on a neighboring property may have implications for future development, financing, or property use.
Understanding surrounding conditions is often just as important as understanding conditions on the property itself.
4. Failing to Align Environmental Due Diligence With Redevelopment Plans
This is one of the most common and costly mistakes.
Environmental due diligence should support the project being planned.
A redevelopment project involving demolition, excavation, utilities, and new construction may require different environmental information than a property being acquired for long-term ownership.
Soil Management
If significant excavation is anticipated, important questions may include:
- Has the soil been characterized?
- Can soil be reused onsite?
- What disposal options are available?
- Have disposal costs been incorporated into the project budget?
Failure to evaluate these issues early can create delays and unexpected costs once excavation begins.
Groundwater and Dewatering
If excavation extends below the water table, groundwater management may become a project consideration.
Questions may include:
- Will dewatering be required?
- Could contaminated groundwater be encountered?
- Will treatment be necessary before discharge?
- Are permits required?
Temporary treatment systems, permit approvals, sampling requirements, and treatment costs can significantly affect project schedules and budgets if not identified early.
Demolition and Renovation Activities
One of the most frequently overlooked redevelopment considerations is asbestos.
Asbestos inspections are not part of the Phase I ESA process.
However, if demolition or major renovation is planned, asbestos inspections may be required to identify asbestos-containing materials and determine whether abatement will be necessary.
Failure to evaluate asbestos early can result in:
- Unexpected abatement costs
- Project delays
- Contractor scheduling challenges
- Permit complications
The most effective environmental due diligence programs answer the questions that matter to the project being planned.
5. Not Understanding the Regulatory Status of a Property
Another common mistake is assuming that environmental concerns identified in the past have already been fully resolved.
Important questions include:
- Was remediation completed?
- Was regulatory closure obtained?
- Are environmental covenants in place?
- Are engineering controls required?
- Are there ongoing monitoring or reporting obligations?
Understanding the regulatory status of a property is often just as important as understanding the environmental conditions themselves.
Practical Questions to Ask Before Acquiring or Redeveloping a Property
- What historical uses occurred onsite?
- Are RECs present?
- Could adjacent properties affect the site?
- Does the redevelopment plan create additional environmental considerations?
- What is the current regulatory status of the property?
These questions can help identify environmental risks before they affect project schedules, budgets, or business decisions.
Final Thoughts
Environmental due diligence is not about eliminating risk.
It is about understanding risk before important business decisions are made.
The most successful projects are often not the ones with no environmental challenges. They are the projects where environmental considerations are identified early, evaluated thoughtfully, and incorporated into the overall project strategy.