What environmental issues should I consider when buying commercial or investment property?
Reviewed August 2026 by Shannon Miles Group
Environmental issues affect property value, usability, and liability. Potential concerns include past uses that may have involved hazardous materials (gas stations, dry cleaners, industrial operations), underground storage tanks, spills or releases, asbestos, lead-based paint, contaminated soil or groundwater, neighboring properties with environmental issues, and flood zones or wetlands. The standard first step for commercial property is a Phase I Environmental Site Assessment (ESA), conducted by a qualified environmental professional. A Phase I reviews the property's history and current conditions to identify recognized environmental conditions. The presence of environmental issues does not necessarily mean a property is unusable, but it can affect financing, insurance, and your legal responsibilities. Every property is different, and professional assessment is essential.
Environmental considerations for buyers.
Environmental issues can affect a property in ways that are not visible during a walk-through. Past uses, neighboring activities, and natural conditions all matter. Understanding these issues before you buy helps you make an informed decision and avoid unexpected liability.
Common environmental concerns
Certain property types and past uses carry higher environmental risk. Properties that were formerly gas stations, auto repair shops, dry cleaners, industrial facilities, manufacturing plants, or agricultural operations with chemical use may have soil or groundwater contamination. Underground storage tanks, whether in use or abandoned, are a common concern. Asbestos in older buildings, lead-based paint, and mold from water intrusion are other issues that may be identified during due diligence.
Neighboring properties can also create environmental concerns. Contamination from a nearby property can migrate onto the subject property through soil or groundwater. If neighboring properties have known environmental issues, those may affect your property as well.
Phase I Environmental Site Assessment
A Phase I ESA is the standard environmental due diligence tool for commercial real estate transactions. It is conducted by an environmental professional who follows the ASTM E1527 standard. The Phase I includes: a review of historical records (aerial photos, fire insurance maps, city directories, prior reports), a site inspection, interviews with people familiar with the property, and a search of government databases for reported environmental conditions at the property and nearby properties.
The Phase I report identifies recognized environmental conditions (RECs) associated with the property. If no RECs are identified, the report is generally considered clean, and no further investigation is typically needed. If RECs are identified, the report may recommend a Phase II ESA, which involves sampling and laboratory analysis to determine whether contamination is actually present and at what levels.
Liability considerations
Environmental contamination can create significant liability for property owners. Under federal and state law, property owners can be held responsible for cleanup costs even if they did not cause the contamination. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, also known as Superfund) and the Texas Solid Waste Disposal Act are among the laws that govern environmental liability. Conducting appropriate due diligence before purchase can help establish certain defenses to liability.
Flood zones and wetlands
Properties in flood zones may require flood insurance and have restrictions on development. FEMA flood maps show which zones are at highest risk. Wetlands are regulated by the U.S. Army Corps of Engineers and the Texas Commission on Environmental Quality (TCEQ). Development on wetlands requires permits and mitigation. Check flood zone designations and wetland maps as part of your due diligence.
Professional guidance is essential
Environmental assessment is a specialized field. Qualified environmental professionals follow established standards and have the training to identify potential issues. Do not attempt to evaluate environmental conditions yourself. Do not rely on a general property inspection to identify environmental concerns. A Phase I ESA is a separate process conducted by a different type of professional. The cost of a Phase I ESA is typically modest compared to the potential cost of addressing unrecognized contamination.
Not every commercial transaction legally requires a Phase I ESA, but lenders almost always require one for commercial loans. Even for cash transactions, a Phase I ESA is strongly recommended as a prudent business practice. If environmental issues are identified, consult an environmental attorney to understand your options and obligations.
This article is for educational purposes only and does not constitute professional environmental or legal advice. Consult a qualified environmental professional and legal counsel for guidance specific to your property and transaction.
Environmental considerations in Northeast Texas.
Northeast Texas has a diverse environmental landscape. Older commercial districts in towns like Paris, Sherman, and Greenville may have properties with long histories of commercial and industrial use that warrant careful environmental review. Agricultural properties may have a history of pesticide or herbicide application, fuel storage, or waste disposal. Properties near rivers, creeks, or floodplains may be in flood zones or have wetland areas.
The Texas Commission on Environmental Quality (TCEQ) is the primary state agency that oversees environmental regulation and cleanup. TCEQ maintains databases of known contaminated sites, leaking storage tanks, and other environmental records that an environmental professional will review as part of a Phase I ESA.
For industrial or formerly industrial properties, consulting with an environmental attorney who understands Texas environmental law is an additional safeguard. The Shannon Miles Group can help you connect with environmental professionals who work in Northeast Texas and understand the local regulatory environment.
Steps for addressing environmental concerns.
- Research the property's history. Ask the seller about past uses, prior environmental reports, and any known issues. Former gas stations, dry cleaners, and industrial sites warrant extra attention.
- Order a Phase I ESA early. Most lenders require it, and even cash buyers benefit from the information. Allow enough time in your due diligence period to complete the assessment and address any findings.
- Hire a qualified environmental professional. Look for someone with experience in commercial property assessments and knowledge of ASTM standards and state regulations.
- Check flood zone maps. FEMA flood maps are available online. If the property is in a flood zone, get a flood insurance quote and understand development restrictions.
- Consult an environmental attorney if issues are found. Environmental law is complex. Professional legal guidance helps you understand your options, obligations, and potential liability.
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