🧾 Who Pays for a Phase I Environmental Site Assessment?

When buying, selling, or refinancing commercial or industrial property, a Phase I Environmental Site Assessment (ESA) is often a necessary step. One of the most common questions we hear at Nexus Environmental is:

"Who is responsible for paying for the Phase I ESA?"

The short answer? It depends — but here’s a breakdown of who typically pays, why, and what to watch out for.

💼 Buyers Usually Pay — But Not Always

In most cases, the buyer pays for the Phase I ESA as part of their due diligence before purchasing a property. Why?

• The buyer assumes the long-term environmental liability once they take ownership.

• Most lenders require a Phase I ESA to secure financing — and those lenders want the report addressed to the buyer. The lender may also require a reliance letter extending reliance on the report to them.

• The buyer benefits from knowing whether there is a risk of contamination that could lead to costly cleanup.

✅ If you’re buying a property with underground tanks, auto repair history, dry cleaning use, or other potential concerns, a Phase I ESA is a small price to pay for peace of mind.

💵 Sometimes the Cost Is Split Between Buyer and Seller

In certain transactions, especially where both parties are motivated to complete the deal efficiently, the cost of the Phase I ESA is shared. This often happens when:

• The seller agrees to contribute to demonstrate good faith.

• The buyer requests the ESA, but the seller wants to retain access to the report.

• Both parties anticipate potential environmental concerns and want a neutral assessment.

🤝 This is a practical option in balanced negotiations, but the arrangement should be made clear in writing — especially regarding who the report is addressed to and who can rely on it.

🏢 Sometimes the Seller Pays — as a Value-Add or Deal Sweetener

In some cases, a seller may order and pay for a Phase I ESA before listing a property, especially if:

• They want to accelerate a sale by showing the site is clean.

• They’re working with a commercial broker who recommends it.

• They expect buyers to raise environmental concerns.

⚠️ Just be aware: if you're a buyer and relying on a seller-paid Phase I ESA, ensure it's recent, done by a reputable firm, and either addressed to you, transferable, or have an additional reliance letter included.

🏦 Lenders May Request It — But Rarely Pay Themselves

Lenders (like banks, credit unions, or private equity firms) commonly require a Phase I ESA as part of their risk management. However:

• The borrower (usually the buyer or refinancing party) almost always pays.

• Some lenders have preferred consultants or minimum insurance requirements — so choosing the right firm matters.

🔄 Other Situations

👷‍♂️ Property Owners:

Sometimes a long-term property owner pays for a Phase I ESA when:

• They're preparing for redevelopment

• They want to refinance

• They're addressing municipal or regulatory inquiries

🏗️ Developers:

When buying raw or industrial land, developers often pay to identify environmental constraints early.

💡 Final Thoughts

At Nexus Environmental, we know every deal is different. Whether you're a buyer, seller, lender, or developer, we tailor our Phase I ESA process to meet your needs — with transparent pricing, fast turnaround, and no-nonsense reporting that helps you move forward with confidence.