Is the Record Search Risk Assessment (RSRA) the New Phase I ESA?

Is the Record Search Risk Assessment (RSRA) the New Phase I ESA?



Phase I ESA

The Phase I ESA has long been the standard for environmental due diligence when commercial property is changing hands. Banks and buyers want to protect themselves and the value of their collateral. The cost of a Phase I ESA can be prohibitively high for some buyers and some properties. You don’t always have to an environmental professional to have a hunch that environmental issues at a site are low.  Hotels that were built in the last 10 years, surrounded by cornfields, on an highway off-ramp come to mind. And yet, lending on a million dollar property with nothing in the file and the environmental box left unchecked can make a bank nervous. Enter the Record Search Risk Assessment (RSRA)…

RSRA – A standard created by the Small Business Administration

Enter the SBA and the Record Search with Risk Assessment (RSRA). It is desktop review of federal and state databases, aerial photographs, topographic maps, and city records.  We read and interpret the historical information and write a few pages which concludes in a risk designation of either high or low. You can read our extensive article about RSRAs by clicking here.

Phase I ESA – The old standby.

The Phase I ESA is the same as everyone remembers. It has advantages over the Record Search with Risk Assessment (RSRA) in its thoroughness and limitations of environmental liability. We review the same databases and historical records but add interviews with local governments, past owners, current owners and occupants of a property. Notably different from the RSRA, a Phase I ESA requires an onsite visit by a scientist. The process takes longer, the report is by far thicker. We give you a much more solid answer of whether you have an environmental problem or not.

RSRA -vs- Phase I ESA – What we think.

We have found that banks are rapidly increasing the use of RSRAs as a replacement for Phase I ESAs even (and especially) on non-SBA lending projects. Essentially the SBA has created a new standard, which is less expensive but less comprehensive which banks are increasingly finding “good enough” to lend on. The RSRA cost is typically 25% of the cost of a Phase I ESA. The decreased costs allow banks to pitch lower transaction costs to their commercial clients, which is often an advantage when borrowers are shopping for banks. Banks using the RSRA in place of the Phase I ESA often feel it helps them land more business and close more loans. In addition, if the RSRA comes back as “High Risk” we can deduct most of the cost of the RSRA from the cost of a Phase I ESA.

Bottom line: Yes, the Record Search with Risk Assessment (RSRA) is oftentimes the new Phase I ESA. There are substantial advantages to following the lead of the Small Business Administration. If you’d like to talk to A3 Environmental Consultants you can call us at (888) 405-1742.

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