Why a Phase I Environmental Assessment Is Critical When Buying a Property for Your Dental Practice

Jordan Uditsky • March 4, 2026

What Lies Beneath

You’re a dental practice owner in search of a new location for your growing enterprise. You’ve decided to purchase rather than lease your new space and have identified an attractive free-standing building that fits the bill. Undoubtedly, you (and likely a professional inspector you retain) will give that structure a thorough once-over to ensure it is suitable and that there are no significant problems that need to be addressed.

 

But that building wasn’t erected in a vacuum – it was built on a piece of land. If your pre-closing due diligence doesn’t include an equally rigorous inspection of that land and, more importantly, what lies below its surface, you could be purchasing a ticking time bomb of environmental liability and remediation obligations.

 

That is why most lenders require buyers of commercial property to conduct a Phase I environmental site assessment (ESA) before they will agree to finance the purchase. Even though such an assessment is not required by law, lenders understand the risks involved if contamination or other environmental hazards are later found to be present. And those risks and accompanying exposure can fall squarely on you and your dental practice, even though you had no role in contaminating the property.

 

However, a Phase I ESA is not only about protecting a lender’s interests, but it also serves as a critical legal and financial protection tool for property purchasers and owners. If you are on the market for a new professional home for your dental practice, here's what you need to know about Phase I ESAs, whether you need one, when to get it, and how the process works.

 

Why a Phase I ESA Matters

 

Phase I ESAs exist because of the environmental contamination legal framework established under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund. CERCLA imposes strict, joint, and several liability on "potentially responsible parties" for the cost of cleaning up contaminated properties. As noted, that liability can attach to current owners of contaminated land even if they had nothing to do with creating the contamination.

 

However, amendments to CERCLA in 2002 provide protection and a safe harbor from liability for certain purchasers and owners. The "innocent landowner" or "bona fide prospective purchaser" (BFPP) defense can serve as a shield against liability if a buyer has conducted "all appropriate inquiries" (AAI) into the property's prior uses before closing. A properly conducted Phase I ESA satisfies this AAI requirement. Skip it, and you could be on the hook for cleanup costs that run into the hundreds of thousands — or millions — of dollars, even for contamination left behind by a tenant or prior owner decades ago. And good luck seeking indemnification from a long-gone or judgment-proof seller or former owner.

 

Many states, including Illinois, have their own environmental cleanup regimes, but federal CERCLA liability is the primary driver behind Phase I requirements in commercial transactions.

 

When to Order a Phase I ESA

 

Timing matters. A Phase I ESA must be completed within 180 days before the closing date to satisfy the ASTM E1527-21 standard and the federal AAI rule. However, certain components, such as interviews with government officials and a review of government databases, must be completed within one year of closing. If your Phase I is more than 180 days old at the time you close, it will need to be updated or a new one commissioned.

 

Accordingly, it is a good idea to order your Phase I ESA early in the due diligence period, not as an afterthought in the final week before closing. If the assessment identifies a Recognized Environmental Condition (REC), a finding that suggests possible contamination, you'll want time to negotiate with the seller, commission a Phase II investigation (which involves actual soil and groundwater sampling), or potentially walk away from the deal. Rushing that process is a costly mistake.

 

How the Process Works

 

A Phase I ESA is conducted by a qualified environmental professional — typically a licensed engineer or geologist with appropriate credentials. The assessment involves four core components:

 

  • Records review (federal and state databases, historical maps, aerial photographs, etc.)
  • Site reconnaissance (a physical inspection of the property and adjoining properties)
  • Interviews with current owners, occupants, and local government officials; and
  • Preparation of a written report.

 

The process typically takes two to four weeks and costs anywhere from $1,500 to $5,000 or more for a standard commercial property, depending on size and complexity.

 

Environmental concerns may not immediately rise to the surface when you are looking to purchase property for your practice, but a Phase I ESA and the guidance of an experienced commercial real estate attorney throughout the process can help ensure that problems don’t bubble up later that could put you in a legal and financial mess.

 

If you have questions about Phase I ESAs or any other issues relating to the purchase of property for your dental practice, please call Grogan, Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation.

 

At Grogan Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.

 

Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices. This blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.

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