Any commercial business owner who plans to purchase land and a building, or plans to build a commercial enterprise is looking at a hefty investment. One of the big risks in developing a business revolves around environmental safety which must be addressed in the early planning and development stages of the enterprise. There are 2 perspectives that need to be considered in the planning stages of a commercial enterprise which may require the need to perform an environmental assessment. Many commercial mortgage lenders will require that an environmental assessment be performed before they will even consider processing a commercial business loan application.
Asides from the loan application, even if you have the funds to build or buy a commercial business, if you fail to get an environmental assessment in Calgary, you could be putting yourself in a state of significant financial risk. The business owner will have to bear the costs of all stages of environmental assessment. There are two areas where you could be exposed and they include:
1. Pre-existing Environmental Issues –
If you plan to buy existing commercial land with or without buildings, you will want to know what type of commercial enterprise existed there previously. This is especially true if you are buying land or buildings which have a commercial or industrial history. In previous years gone by, environmental laws were relatively lax if non-existent. It was quite common to simply dump toxic by-products into holding pits or bury them underground in barrels. Even companies which had some safeguards could have had leaks or spills from ruptured pipes or containers. Older buildings constructed before the 1980’s are very likely to have used asbestos. You must know what is there both in the land and the buildings.
2. The Environmental Impact of your Business –
This essentially relates to how your business might potentially and adversely impact the environment. Many industrial processes must adhere to strict regulatory guidelines in the use and application of industrial chemicals and processes. This includes storage, how it is being used and properly disposed.
Types Of Environmental Assessments
The environmental site assessment process can be broken down into three “phases” as follows:
Phase I Environmental Site Assessment (Phase I ESA)
The main reason for a Phase 1 ESA is to establish whether you will require a Phase 2 ESA. A Phase 1 ESA is used as a fact finding procedure and no actual physical testing takes place. The purpose is to determine one of the following:
1. Whether the commercial property could be contaminated, or
2. Whether the property could become contaminated from the type of business being set up.
Phase II Environmental Site Assessment
If the consultant determines that a phase II ESA is required, this is where the process of taking physical samples and testing occurs.
Phase III Environmental Site Assessment
This phase is also called site remediation. It can be a very expensive process depending on the extent and type of pollutants involved, and how they are to be removed and disposed. Very few commercial sites require a remediation process.
As the cost of an environmental assessment can spiral almost exponentially through the 3 phases, particularly where remediation is concerned, you can now appreciate the reasons why not only your lender, but you yourself as a business owner will want to at least conduct a Phase 1 Environmental Assessment as it is money well spent.
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