Terms of Use

Environmental Questionnaire (EQ): The purpose of the Environmental Questionnaire is to obtain information regarding the current and previous uses of the subject property and determine if additional due diligence is warranted prior to loan closing. The Environmental Questionnaire is a document that is typically completed by the borrower and the Relationship Manager or Loan Officer.  The SBA requires the EQ be completed bythe current owner land owner or operator, however.

Environmental Screen with Risk Rating: An Environmental Screen is used to determine if the subject property or adjacent properties are identified on an environmental regulatory database report.  An ⅛-mile regulatory database report is reviewed, and an Environmental Professional Risk Rating is provided. This due diligence product is a screening tool for new loans with relative low loan amounts and for renewals to determine if additional environmental due diligence is warranted.

Environmental Screen Plus: The Environmental Screen Plus is similar to the Environmental Screen, as it includes a ⅛-mile radius report and Environmental Professional Risk Rating, but the Environmental Screen Plus also includes a review of readily available online historical aerial photographs. This environmental due diligence product is used to determine if the subject property or adjacent properties are identified on a regulatory database report and as a screening tool for low-risk collateral properties with relatively low loan amounts. However, the Environmental Screen Plus is also a great tool for evaluating the environmental risks associated with existing collateral, as it can be used to determine if any new environmental regulatory listings of concern have been identified since loan origination.

Desktop Review or Records Search with Risk Assessment (RSRA): The Desktop includes a review of an Environmental Questionnaire, Regulatory Database Report (defined below), and historical sources (city directories and aerials, or city directories and fire insurance maps). The Desktop may also include a telephone interview with a knowledgeable property contact or site representative. This product meets the U.S. Small Business Administration (SBA) Standard Operating Procedures (SOP) for low risk sites.

Phase I Environmental Site Assessment (Phase I ESA): The Phase I ESA includes an investigation of the current and previous uses of the subject property and surrounding area for the purpose of identifying actual contamination or potential sources of contamination. The four main components of a Phase I ESA include a records review, a site reconnaissance, interviews and the report itself. The Phase I ESA is intended to permit the user to satisfy one of the requirements necessary to qualify for the innocent landowner, contiguous property owner or bona fide prospective purchaser defense under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The Phase I ESA is used to determine if there are 1) any environmental issues on the proposed collateral that might result in a decline in property value, 2) remediation costs that might affect the client’s ability to repay the loan or present an issue for in a foreclosure situation, and 3) issues that might represent a reputational risk to the bank.

Bona Fide Prospective Purchaser – A person may qualify as a bona fide prospective purchaser if, among other requirements, such person made “all appropriate inquiries into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices.” Knowledge of contamination resulting from all appropriate inquiries would not generally preclude this liability protection. A person must make all appropriate inquiries on or before the date of

purchase. The facility must have been purchased after January 11, 2002.

Innocent Landowner – A person may qualify as one of three types of innocent landowners: (1) a person who “did not know and had no reason to know” that contamination existed on the subject property at the time the purchaser acquired the subject property; (2) a government entity which acquired the subject property by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation; or (3) a person who “acquired the facility by inheritance or bequest.” To qualify for the innocent landowner defense, such person must have made all appropriate inquiries on or before the date of purchase. Furthermore, the all appropriate inquiries must not have resulted in knowledge of the contamination. If it does, then such person did “know” or “had reason to know” of contamination and would not be eligible for the innocent landowner defense.

Landowner Liability Protections (LLPs) – a defense to CERCLA available to bona fide prospective purchasers, contiguous property owners, and innocent landowners.

Phase II Environmental Site Assessment (ESA): A Phase II ESA is a subsurface investigation that includes soil, soil vapor and/or groundwater sampling. The purpose of the Phase II is to identify the presence of contamination or determine the extent of impact.

Phase III: The process of active remediation of an environmental condition (soil excavation, groundwater treatment, soil vapor recovery, etc.).

Regulatory Database Report (RDR): The Regulatory Database Report is used to determine if the subject property or surrounding properties are listed in any federal, state, or tribal environmental record sources. The minimum search distance and databases reviewed shall be what is defined in the Phase I ESA standard (ASTM E1527).

Environmental Screen –

Transaction Screen Assessment (TSA) – A limited environmental assessment that includes the completion of a standard questionnaire by the client, a site inspection by a trained professional, and a limited database search of certain government records and certain historical sources. The TSA is used when the due diligence undertaken for a Phase I ESA is considered unnecessary by the user. The scope of work found in a transaction screen is found in ASTM E1528.

Recognized Environmental Conditions (RECs): the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to any release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.

Historical Recognized Environmental Conditions (HRECs) – a previous release of hazardous substances or petroleum products affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities and meeting unrestricted use criteria established by the applicable regulatory authority or authorities without subjecting the subject property to any controls (for example, activity and use limitations or other property use limitations). An HREC is not a REC.

Controlled Recognized Environmental Conditions (CRECs) – a REC affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place subject to implementation of required controls.

Vapor Encroachment Condition (VEC) – the presence or likely presence of chemicals of concern (COC) vapors in the vadose zone of the subject property caused by the release of vapors from contaminated soil and/or groundwater either on or near the subject property.

Business Environmental Risk (BER) – a risk which can have a material environmental or environmentally-driven impact on the business associated with the current or planned use of commercial real estate, not necessarily related to those environmental issues required to be investigated in this practice. Consideration of BER issues may involve addressing one or more non-scope considerations.

De Minimis Condition – a condition related to a release that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.

Non-Scope Items – there may be environmental issues or conditions at a property that parties may wish to assess in connection with commercial real estate that are outside the scope of a Phase I ESA. These items include asbestos-containing materials (ACMs), lead-based paint (LBP), biological agents, cultural and historic resources, ecological resources, endangered species, health and safety, indoor air quality unrelated to releases of hazardous substances or petroleum products into the environment, industrial hygiene, lead in drinking water, mold or microbial growth, polychlorinated biphenyls (PCBs), radon gas, regulatory compliance issues, substances not defined as a CERCLA hazardous substance (such as PFAS/PFOA), and wetlands.

SBA Environmental Requirements – SBA’s environmental policies and procedures apply to all SBA Lenders on all 7(a) and 504 loan programs, except where otherwise indicated. Environmental policies apply only to real estate acquired, refinanced, or improved by the loan proceeds. This section is not applicable to real estate collateral that is available from, for example, a lien filed for a loan where proceeds are not used to acquire, refinance, or improve the real estate.

SBA Mitigating Factors – (1) Indemnification, (2) Completed Remediation, (3) No Further Action, (4) Minimal Contamination with Minimal Remediation, (5) Clean-up Funds, (6) Escrow Account, (7) Groundwater Contamination Originating from another Site, (8) Additional or Substitute Collateral, and (9) Other Factor(s) such as the existence of adequate environmental insurance that is already in place and already paying remediation costs, bonds, agreements not to sue present and future property owners from the Governmental Entity, brownfields agreements, Engineering and Institutional Controls, etc. However, reliance solely upon “Other Factor(s)” requires clearance from the SBA Environmental Committee.

Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – stablished in 1980, otherwise known as the Superfund, provides a Federal “Superfund” to clean up uncontrolled or abandoned hazardous-waste sites as well as accidents, spills, and other emergency releases of pollutants and contaminants into the environment.

Resource Conservation & Recovery Act (RCRA) – established in 1976 and amended in 1986, RCRA gives EPA the authority to control hazardous waste from cradle to grave. This includes the generation, transportation, treatment, storage, and disposal of hazardous waste. RCRA also set forth a framework for the management of non-hazardous solid waste. The 1986 amendments to RCRA enabled EPA to address environmental problems that could result from underground tanks storing petroleum and other hazardous substances.

Brownfields – a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. The purpose of this designation is to encourage redevelopment of properties in the district through tax benefits and other resources for redevelopment activities.

Activity and Use Limitations (AULs) – Institutional and/or engineering controls placed on a property to assist in mitigating the potential exposure pathway(s) for documented subsurface impacts.

Environmental Lien – a charge, security, or encumbrance upon title to a property to secure the payment of a cost, damage, debt, obligation, or duty arising out of response actions, cleanup, or other remediation of hazardous substances or petroleum products upon a property, including (but not limited to) liens and similar state or local laws.

Miscellaneous Abbreviations/Standards:

  • AAI – All Appropriate Inquiries
  • ASTM E1527-21 – American Society of Testing & Materials E1527-21 (Environmental Site Assessments: Phase I Environmental Site Assessment Process)
  • ASTM E1528-22 (Limited Environmental Due Diligence: Transaction Screen Process)
  • ASTM E2600-15 (Vapor Encroachment Screening on Property Involved in Real Estate Transactions)
  • EPA – Environmental Protection Agency
  • UST – Underground Storage Tank
  • AST – Aboveground Storage Tank
  • LUST – Leaking UST
  • LAST – Leaking AST
  • VOC – Volatile Organic Compounds
  • PAH – Polynuclear/polycyclic hydrocarbons
  • TPH – Total Petroleum Hydrocarbons
  • PCE – Tetrachloroethylene
  • EDB – Ethylene Dibromide
  • GPR – Ground Penetrating Radar
  • SMP – Site Management Plan
  • NPDES – National Pollutant Discharge Elimination System
  • EP – Environmental Professional
  • PFAS – Per- and polyfluoroalkyl substances
  • PFOA – Perfluorooctanoic acid
  • PFOS – Perfluorooctane sulfonic acid
  • NFA – No Further Action
  • NORP – Notice of Residual Petroleum
  • VCP – Voluntary Cleanup Program
  • USGS – United States Geological Survey