Keeping REC’s from Wrecking Your CRE Deal: Tackling Recognized Environmental Conditions in Phase I ESA’s

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Finding a Recognized Environmental Condition (REC) in your Phase I Environmental Site Assessment (ESA) might seem daunting, but remember, every challenge is an opportunity in disguise. As a prospective property buyer, understanding how to navigate this situation can turn a potential crisis into a valuable chance for negotiation and informed decision-making. Let’s explore what you can do when a Phase I ESA reveals a REC, including a look at common types of RECs you might encounter.

Typical Recognized Environmental Conditions

RECs can vary widely, but here are some common examples you might encounter:

  • Underground Storage Tanks: Old or poorly-maintained tanks may leak hazardous substances.
  • Historical Industrial Use: Properties with past industrial activities often have soil or groundwater contamination.
  • Chemical Spills: Previous spills, even if minor, can lead to soil or water contamination.
  • Improper Waste Disposal: Historical dumping of industrial waste or inadequate waste management practices.

Step 1: Keep Calm and Assess

Upon discovering a REC, take a moment to assess. These findings are more common than you might think and can often be managed efficiently and effectively.

Step 2: Seek Expert Advice

Engage with the environmental professionals who conducted the Phase I ESA. They can provide a deeper understanding of the specific REC and its potential impact.

Step 3: Consider a Detailed Phase II ESA

If a REC is identified, a Phase II ESA is usually the next step. This detailed investigation will clarify the extent of any contamination and the potential remediation required.

Step 4: Understand Remediation and Liability

Based on the Phase II findings, evaluate the need for remediation and understand your potential liability. In this step, knowledge of environmental laws and obligations is key.

Step 5: Negotiate, Seeing Opportunity in Crisis

Remember, even minor environmental issues can be a negotiation point. Sellers may be more willing to discuss price adjustments or take on remediation responsibilities due to the RECs found.

Step 6: Investigate Financial and Insurance Solutions

Explore grants, loans, and brownfield incentives for environmental cleanup. Environmental insurance can also mitigate risks and costs.

Step 7: Make an Informed Choice

Weigh the information, risks, and costs against your investment goals. This decision should be well-informed and aligned with your strategy.


Encountering a REC in a Phase I ESA is not just a challenge; it’s a chance to negotiate better terms and make more informed decisions. With the right approach and expert guidance, you can navigate these challenges successfully. And remember, Phoenix Environmental is here to help you understand and manage these environmental issues. Don’t let RECs deter your investment journey. Talk to us at Phoenix Environmental and let us explore how we can turn these challenges into opportunities for you.