What is a Phase 2 Environmental Site Assessment for industrial property?
By Michael Law, Industrial Real Estate Broker
Quick answer
A Phase 2 Environmental Site Assessment (ESA) involves physical sampling — soil borings, groundwater testing, and material analysis — to confirm or rule out contamination identified or suspected in a Phase 1 ESA. It is triggered when a Phase 1 identifies areas of potential environmental concern.
What is a Phase 2 Environmental Site Assessment for industrial property?
A Phase 2 Environmental Site Assessment (Phase 2 ESA) is a targeted investigation involving physical sampling and laboratory analysis of soil, groundwater, and building materials to characterize the presence and extent of contamination at an industrial property. It is triggered when a Phase 1 ESA identifies recognized environmental conditions (RECs) — circumstances suggesting past or present contamination — that require further investigation before a property transaction can proceed. Phase 2 ESA activities typically include: - Soil borings: Drilling to collect soil samples at specified depths across suspect areas of the site - Groundwater monitoring wells: Installing wells to sample and analyze groundwater for dissolved-phase contaminants - Soil vapour sampling: Checking for volatile organic compound vapour migration that may affect indoor air quality - Building material sampling: Asbestos, lead paint, and mould surveys in older industrial structures Common contamination scenarios in GTA industrial real estate include underground storage tank (UST) releases, solvent migration from dry cleaning or metal finishing operations, PCB-contaminated transformer sites, and petroleum hydrocarbon spills from vehicle maintenance. A Phase 2 ESA can result in several outcomes: - No contamination confirmed: Transaction proceeds normally - Contamination confirmed but within acceptable risk thresholds: Risk assessment and risk management plan (RMP) may allow transaction to proceed with conditions - Contamination requiring remediation: Clean-up costs must be negotiated between buyer and seller, and may render the transaction uneconomic In Ontario, the Environmental Protection Act and Ontario Regulation 153/04 (Record of Site Condition) govern environmental due diligence requirements for industrial land. A Record of Site Condition (RSC) is required when an industrial property is converted to a more sensitive use. Michael Law coordinates environmental due diligence as part of industrial acquisition advisory services. Contact before purchasing any industrial property with historical manufacturing or fuel storage use.
Related questions
Other questions about this
Do I need a Phase 2 ESA to lease industrial space?
Not always. Phase 2 ESAs are most commonly required for purchase transactions rather than leases. However, sophisticated tenants making large leasehold investments should consider conducting at least a Phase 1 ESA — and Phase 2 if warranted — to understand contamination risk before committing to a long-term lease and leasehold improvements.
Who pays for a Phase 2 ESA in a property sale?
In Ontario, the buyer typically commissions and pays for Phase 1 and Phase 2 ESAs as part of due diligence. However, if contamination is found and remediation is required, the cost allocation between buyer and seller is negotiable — a purchase price reduction, seller-funded remediation, or an indemnity are all common outcomes.
Michael Law
Industrial Real Estate Broker, Managing Partner
Lennard Commercial Realty · RECO #4874682
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