The Phase I found a REC. Now what?

A recognized environmental condition means hazardous substances or petroleum products are present or likely present at the property because of a release or likely release, or are present under conditions that pose a material threat of a future release. It is not a verdict on the deal. What happens next is a sequence of decisions.

1. Understand what kind of finding it is. A REC based on a documented open cleanup case is different from one based on a likely historical release nobody investigated. The report's rationale, meaning the evidence behind the opinion, tells you how much uncertainty you are holding.

2. Decide whether to characterize it. A Phase II (sampling) converts "likely" into data: is contamination present, how much, where. Lenders frequently require this before proceeding. Some buyers instead price the uncertainty and move on. That is a risk decision, not a diligence failure.

3. Structure around it. Deals absorb RECs constantly, through price adjustments, escrows and holdbacks, seller remediation obligations, indemnities, environmental insurance, or enrollment in a state voluntary cleanup program with its liability protections. The finding becomes a term of the transaction.

4. Preserve your protections. For CERCLA defenses, the buyer's obligations do not end at the report. Continuing obligations apply after closing, among them reasonable steps regarding the contamination found, cooperation with response actions, and compliance with land use restrictions and information requests.

A REC rarely justifies panic or dismissal. The expensive failure mode is not finding one. It is a report that missed one, or a buyer who treated the finding as a formality.