Important Considerations for In-Building Environmental Due Diligence

When purchasing real estate, whether it be multifamily residential, commercial or industrial, it is important to consider hiring an environmental consultant to perform a standard Phase I Environmental Site Assessment (ESA) in accordance with the ASTM International (ASTM) E 1527-13, Standard Practice for Environmental Site Assessments components that complies with the components of All Appropriate Inquiry Rule (AAI).

Although Phase I ESAs are a great start for environmental due diligence to satisfy liability requirements, each property is unique and additional investigations of non-ASTM scope considerations should be conducted, especially if there are pre-existing structures associated with the property. Buildings generally add the highest percentage of value to a property and should be assessed for potential exposures and expenditures related to environmental, health and safety (EHS) matters, including in-building surveys for asbestos containing materials (ACM), lead-based paint (LBP), mold and radon.

Asbestos-Containing Building Materials (ACM)

It is highly recommended that an ACM survey is included in your environmental due diligence scope if any of the following apply:

• If the structure was constructed prior to the 1980s, following a string of National Emission Standards for Hazardous Air Pollutants (NESHAP) and Consumer Product Safety Commission (CPSC) regulations, which limited and/or banned the use of asbestos in building materials.
• There is any suspicion of ACMs at the property. The only way to know for sure is to collect samples.
• If the structure is to be demolished, renovated or remodeled as part of the future property plans. Typically, local building departments or building-permit regulators will require proof that an ACM survey has been performed prior to issuing a permit to protect human health and the environment.

The way to most accurately determine the presence of ACM in building materials is to conduct sampling by a state-licensed asbestos inspector and laboratory analysis of the suspect materials by a National Voluntary Laboratory Accreditation Program (NVLAP)–certified laboratory.  Visual identification is not sufficient to determine the presence or absence of microscopic asbestos fibers.

NOTE: Potential building purchasers or current owners should be conscious about their building’s condition and potential ACM so that it can be safely managed or removed. If identified ACM are in good, non-friable condition and disturbance of those materials is not anticipated during renovation or demolition activities, they can usually be safely managed in place through an Operation and Maintenance (O&M) Plan.

Lead-Based Paint (LBP)

Simply put, extended exposure to LBP has been proven to have adverse health effects. LBP can be found in a variety of buildings constructed prior 1978, when the Consumer Product Safety Act passed regulations prohibiting the use of lead-containing paints for products. However, it should be noted that buildings constructed into the 1980s may have been finished with paint that was manufactured in the 1970s. There is an even higher risk of LBP exposures if the building was constructed before the 1950s.

LBP surveys are typically included (and even required by many lenders) as part of the environmental due diligence scope for multifamily residential and commercial real estate transactions. LBP surveys at these structures are warranted, especially when peeling or damaged paint is identified, or when these structures are occupied by children, who are most susceptible to lead poisoning by ingestion of paint chips or dust. Renovation and demolition activities may also disturb lead-based paint or generate leaded dust, so lead sampling of coatings prior to these activities is important for compliance with Occupational Safety and Health Administration (OSHA) regulations.

NOTE: Should it be determined that LBP removal is necessary, contractor oversight and air monitoring can help ensure safe, compliant and effective cleanup during abatement activities.

Mold

Mold spores are naturally occurring and are common in nearly all interior and exterior dusts. Most of these spores do not present exposure risks; however, certain genera of mold, or mold at elevated concentrations, can present a respiratory health hazard. Mold inspections should be considered as part of the due diligence scope, especially when the following warning signs are observed during a building walkthrough:

• If there is a suspicion of mold based on correspondence or known water damage.
• When a musty or moldy odor is detected.
• There have been plumbing leaks or water infiltration through roofing or foundations.
• If mold abatement has been completed previously but no testing has been conducted to confirm the issue has been abated or returned to normal levels.

NOTE: There are no United States Environmental Protection Agency (USEPA) or federal screening limits for mold or mold spore concentrations, and thus sampling alone cannot be used to confirm a building's compliance with federal mold standards. However, the results of surface sampling and indoor air monitoring, when compared to background or exterior conditions, may be useful to determine if there is an exposure risk or if an impacted area has been adequately cleaned or remediated.

Radon

Radon is a colorless, odorless radioactive gas produced during the decay of naturally occurring uranium in soils. Radon can present a health hazard when it enters a closed structure and accumulates, creating an inhalation risk to occupants.

Although radon exposure is generally associated with residential properties, it affects commercial properties in the same way and should be evaluated at any property where people spend extended periods of times. Commercial properties that are susceptible to potentially dangerous radon exposure and even be subjected to certain regulations include offices, schools, daycares, long-term health care facilities and multifamily residential properties.

NOTE: There is no “safe” level of radon exposure although the USEPA’s recommended action level is 4.0 picocuries per liter of air (pCi/L).

The ASTM Phase I ESA standard notes that investigation of non-scope considerations or in-building assessments is at the discretion of the user based on their particular risk tolerance and specific requirements or preconditions set forth in a transaction. Typically, identification of ACM, LBP, radon or mold within a building footprint results in a “business environmental risk”— defined by the ASTM standard as “risk which can have a material environmental or environmentally driven impact on the business associated with the current or planned use of a parcel of commercial real estate, not necessarily limited to those environmental issues required to be investigated in this practice.”