Scotsman Guide - April 2009 Commercial Edition

Going Through a Phase?

Inspection requirements

Fannie Mae’s and Freddie Mac’s Phase i standards are based on those of the american Society of Testing Materials (a STM), with some modifications.

For the Phase i and property-condition assess-
ment, Fannie and Freddie require visual inspec-
tion of 10 percent of a property’s units, as well as
50 percent of any down units. These units should
be randomly selected and spread across the prop-
erty to allow for an accurate representation.
inspectors likely will observe each room
within the individual unit and may pay extra at-
tention to the water-supply piping, water heaters,
air supply and return vents, electrical wiring for
outlets and light switches, windows, and appli-
ances. in addition, the inspectors likely will view
the property’s exterior to note the overall con-
dition of the building and roofing, surrounding
drainage features, electrical transformers, and
asphalt parking areas or carports.
in addition to the apartment units, the inspec-
tors often observe the leasing offices, clubhouses,
pool areas and other property amenities.

Areas of concern

Beyond the typical aSTM requirements for a Phase i assessment, Freddie Mac and Fannie Mae require addressing other concerns, including: ■■ RADON: This colorless, odorless gas is formed via radioactive decay of radium atoms. according to the U.S. environmental Protection agency (ePa), radon is the second-leading cause of lung cancer in the U.S.

The ePa has divided the country into three radon zones. Zone No. 1 comprises areas that have the highest potential for radon, with the average predicted indoor radon concentration exceeding the ePa action limit of 4 picocuries per liter. Zone No. 2 has moderate radon potential and Zone No. 3 has low potential. view the map at epa.gov/ra-don/ zonemap.html.

Keep in mind, though, that the ePa has found properties with elevated levels of radon in all three zones. it therefore recommends site-specific testing to determine radon levels. The zone map also offers a valuable indication of the propensity of radon-gas accumulation in structures.

Freddie and Fannie require that eSas determine if radon-gas accumulation is a potential concern for a property.

Sampling may be required. environmental consultants vary widely on their method of sampling. Some place canisters in a minimum number of units, regardless of the ePa radon zone, while others only place canisters in Zone No. 1 areas.

The short-term test consists of setting out small canisters containing charcoal and a metal-screen covering. These canisters should be placed four to five feet off the ground and away from any vents or open windows to allow for accurate results. They must be open for 48 to 96 hours and then collected, properly sealed and returned to the laboratory for analysis.

it is important that the apartment units selected for radon testing maintain “closed house” conditions from 12 hours before the test until its completion. This means having no open windows for extended periods of time and only routine use of doors.

if the short-term test has results above the ePa action limit, then a longer test — which can range between three months and one year — is required. if results are all below the action level, no further assessment is required.

Sampling results will be included in the Phase i report and typically include any recommendations for additional testing or mitigation, if necessary.

■■ ASBESTOS: This material had been used commonly as an acoustic insulator, for thermal insulation, for fire proofing and in other building materials. Because of the fibers’ microscopic size, airborne friable asbestos can be inhaled — and may result in a potential health risk. Continued exposure can increase the amount of fibers that remain in the lungs. Over time, fibers embedded in lung tissue may cause serious lung diseases including asbestosis, lung cancer or mesothelioma.

The Occupational Safety and Health administration finds the installation of friable surfacing material and thermal-system insulation unlikely to contain asbestos-containing materials (aCMs) in buildings constructed after 1980. Freddie and

Fannie require Phase i assessments to include an opinion about the potential for aCMs at the subject property.

Fannie Mae considers materials from 1979 or
earlier to have potential aCMs; Freddie Mac, on
the other hand, leaves this determination to in-
dividual consultants.
if consultants suspect aCMs, they must collect
samples of friable material, which are materials
that can be crushed easily by hand. These include
pipe insulation and acoustic ceiling panels.
if consultants do not identify any friable or
damaged materials, Fannie and Freddie will ac-
cept managing the identified suspect aCMs
within an operations-and-maintenance program
implemented at the site.

Many states have licensing requirements for collecting asbestos samples, so it is important that the inspector have proper certification.

■■ LEAD-BASED PAINT: The residential Lead-Based Paint Hazard reduction act of 1992 — also known as Title X — was designed to protect people from exposure to lead in paint, dust and soil. Section No. 1018 of this law mandates the disclosure of known information on lead-based paint and its hazards before the sale or lease of most housing built before 1978. Sellers, landlords and their agents are responsible for providing this information to the buyers or renters.

For properties built before 1978, Freddie Mac gives borrowers the option to either:

1. Test for lead-based paint; or

2. Presume lead-based paint is present and implement an operations-and-maintenance program to manage the hazard in place.

regardless of borrowers’ action, environmental consultants must comment on the paint condition for all properties built before 1978. Lead-based-paint testing must meet Freddie Mac’s minimum standards.

Fannie Mae, on the other hand, mandates in-field screening of painted surfaces in buildings constructed before 1978, unless it gives the lender a waiver. The waiver allows the lender to assume that lead-based paint is present and to implement an operations-and-maintenance program. The in-field screening requirements include testing representative painted surfaces from 10 percent of units for a maximum of 30 samples. Continued on Page 49

Summer Gell is a principal with Partner Engineering and Science, an environmental- and engineering-consulting firm that focuses on environmental and engineering due diligence. Her clientele includes dozens of national and regional lenders, brokers, and developers. Throughout

her career, Gell has participated in more than 5,000 Phase I environmental site assessments and is well-versed in due-diligence-reporting standards. Reach her at (214) 666-6800 or summer@partneresi.com.