🏢 Why Does My Lender Want a Phase I ESA?

If you're buying, refinancing, or developing a commercial or industrial property in Alberta, your lender may require something called a Phase I Environmental Site Assessment (ESA). If you've never encountered one before, this request might seem confusing — or even unnecessary.

So, what is a Phase I ESA, and why does your lender want it?

🧪 What Is a Phase I ESA?

A Phase I ESA is an environmental risk assessment of a property — typically required before a real estate transaction involving commercial or industrial land. It involves a review

of the site’s current and historical uses, a site visit, and regulatory and database research to determine if there’s any potential for contamination in the soil or groundwater.

Importantly:👉 No soil or water sampling is done during a Phase I ESA. It’s a non-intrusive, document-based assessment designed to identify potential environmental risks, not confirm them.

💵 Why Do Lenders Require It?

Lenders — such as banks, credit unions, and private mortgage brokers — have one simple reason: to protect their investment.

If contamination is found on the property after financing has been approved, it can cause major legal, financial, and liability headaches for everyone involved. Here’s how a Phase I ESA helps:

1. Reduces Financial Risk

Environmental contamination can devalue a property or lead to costly cleanup orders. Lenders want to know there aren’t any hidden risks before putting their money on the line.

2. Helps Comply With Federal Lending Standards

Major financial institutions often have internal risk policies or follow federal guidelines that require environmental due diligence for commercial properties.

3. Ensures the Property Is "Financeable"

Without a Phase I ESA, the lender might not be able to proceed with financing. In some cases, the property can’t even be insured without one.

📌 What Happens If the Report Finds a Problem?

If the Phase I ESA identifies potential environmental concerns (called Recognized Environmental Conditions or RECs), the lender may request a Phase II ESA to confirm if there is actual contamination. Even then, this is about gathering information, not about assigning blame or halting the deal.

✅ Bottom Line: It’s About Smart Decision-Making

At Nexus Environmental, we help buyers, sellers, and lenders make informed decisions by delivering clear, defensible Phase I ESA reports tailored to each property’s unique history and risk profile. If your lender has asked for one, don’t stress — it’s a common and valuable step in the commercial property process.

Need a Phase I ESA in Alberta? Contact us today to get the process started — we make it simple, fast, and reliable.

📞 4usenvironmental.ca