Environmental stuff scares sellers. I get it. The word “environmental” in a real estate transaction makes people think of million-dollar cleanups and lawsuits and deals falling apart. And sometimes that’s warranted. But most of the time it’s manageable if you know what to expect.
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Review Your Property’s History: Understand what happened on your site in prior decades. Prior owner using it as a repair shop or printing facility? That’s Phase II trigger territory. -
Do Your Own Phase I Upfront: Order Phase I yourself before marketing. Cost is $1,500-3,000. Knowing what’s coming gives you negotiating floor. -
Disclose Known Issues Proactively: If you know about prior industrial use, remediation work done by prior owner, or environmental testing results, disclose it. Buyers respect transparency. -
Understand Your Liability Timeline: NC and SC have different statute of limitations for environmental claims. Understand when you’re off the hook for issues discovered after sale. -
Know When Phase II Is Likely: Prior gas station, dry cleaning, auto body shop, or printing facility on-site? Phase II is coming. Get ahead of it with testing or disclosure.
Phase I: The standard
Every commercial real estate transaction involves a Phase I Environmental Site Assessment. The buyer orders it (I always do), but the seller should understand what it is and what it’s looking for.
Environmental disclosure matters more than you think
A seller who discloses “prior owner had an auto repair shop from 1990-2005, Phase I done in 2015, no Phase II needed” is transparent. A seller who hides that history and lets buyer discover it during Phase I is now fighting for deal survival. Even if remediation isn’t needed, hidden environmental history creates buyer distrust and negotiation leverage swings. Phase II costs $10-15K. Letting Phase II discover surprises costs you 5-10% of deal value.
A Phase I is basically a history check. An environmental consultant reviews historical aerial photos, city directories, fire insurance maps, and regulatory databases to see if the property or any neighboring properties have a history of contamination. They also walk the site looking for obvious red flags: stained soil, abandoned tanks, chemical storage, that kind of thing.
Most Phase I reports come back clean. “No recognized environmental conditions.” Good to go. Costs about $2,500-4,000 depending on the site and the consultant.
When it gets complicated
If the Phase I finds something, the next step is usually a Phase II. That’s when they actually take soil and groundwater samples. This is where it can get expensive. $10K-30K depending on how many samples they need. And if they find contamination above regulatory thresholds, you’ve got a real problem.
Properties I see this with most often: old gas stations (underground storage tanks), dry cleaners (solvent contamination), manufacturing sites that used chemicals, auto repair shops with floor drains. If your building has any of that history, you should be aware going in.
I’ve looked at properties in Greensboro and Spartanburg that had minor environmental issues. A former auto shop with some petroleum in the soil. An old manufacturing building where the neighbor’s contamination had migrated onto the property. In both cases, we worked through it. I discounted the purchase price to account for the remediation cost and closed the deal.
What sellers should do
If your building has ever been used for anything involving chemicals, fuels, or manufacturing, consider getting a Phase I done yourself before you go to market. It’s better to know about issues upfront than to have a buyer find them during due diligence and use it as a reason to re-trade or walk.
If you know about existing contamination, be upfront about it. Most states, including NC and SC, have voluntary cleanup programs that can provide liability protection once remediation is complete. And many contamination issues are less severe and less expensive to address than people fear.
The bottom line
Environmental issues don’t have to kill a deal. I’ve closed on a property with known contamination because I understood the cost to remediate and factored it into my price. The key is transparency. Tell me what you know. I’ll figure out the rest.
Seller takeaway
If you own commercial property and are uncertain about environmental history or prior industrial use, get a Phase I done proactively. Call Roth Capital at 704-600-3839 to discuss your property’s environmental profile and what to disclose to future buyers.
Got an industrial property you’re thinking about selling? Worried about environmental issues? Call me and let’s talk through it. 704-600-3839.
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