Short answer: In a Phase I Environmental Site Assessment (ESA) under ASTM E1527-21, a recognized environmental condition (REC) means hazardous substances or petroleum products present at the property because of a release, likely present because of a release or likely release, or present under conditions that pose a material threat of a future release. A controlled REC (CREC) is a REC; a historical REC (HREC) and a de minimis condition are not.
ASTM E1527-21, the Phase I standard the U.S. Environmental Protection Agency (EPA) recognizes for commercial property under All Appropriate Inquiries (AAI) at 40 CFR 312.11, sorts what the Environmental Professional (EP) finds into a few labels. Lenders, attorneys and the U.S. Small Business Administration (SBA) react to each one differently.
| Finding | Is it a REC? | What the report must do with it | What usually follows |
|---|---|---|---|
| Recognized environmental condition (REC) | Yes | Photograph it, explain the call in Opinions and list it in the Conclusions | The EP’s opinion on further investigation, often a Phase II |
| Controlled REC (CREC) | Yes, a type of REC | Identify the documents that impose the controls in Findings and Opinions, and list it in the Conclusions with the other RECs | Review the closure documents and controls, and comply with them after purchase |
| Historical REC (HREC) | No | Explain the call in Opinions | Usually nothing more, once the EP confirms the closure meets current criteria |
| De minimis condition | No | Photograph it and explain the call in Opinions | Usually nothing more |
| Significant data gap | No, reported separately | Identify it in Findings, explain its effect on the EP’s opinion and list it in the Conclusions | Close the gap before closing if you can |
The report rules come from EPA’s comparison of E1527-21 with the AAI rule (EPA comparison document, pp. 2-3, 7, 8 and 12) and, for the CREC control documents, from the standard’s own discussion quoted in the CREC section. For everything else a Phase I covers, see what is included in a Phase I.
Recognized environmental condition (REC): the E1527-21 definition
E1527-21 defines a REC in three parts (ASTM E1527-21, Section 1.1.1). In paraphrase, a REC is any of the following:
- Hazardous substances or petroleum products present in, on or at the subject property because of a release to the environment.
- Those substances likely present at the subject property because of a release or a likely release.
- Those substances present at the subject property under conditions that pose a material threat of a future release.
“Likely” is now a defined term: something neither certain nor proved, but that a reasonable observer would expect or believe based on the EP’s logic, experience or the available evidence, as explained in the report (Mitchell Williams presentation). A REC is a professional judgment that contamination is present or probably present, or that a material threat of a release exists. It is not a lab result, and the AAI rule does not require sampling (EPA Common Elements guidance, p. 6, note 22).
Examples: a former gas station with no record that its tanks were removed, an open leaking underground storage tank case on the property, an upgradient dry cleaner whose solvent plume is documented or likely to extend beneath the property, and stained soil beneath a pad-mounted transformer. The test is always the subject property. Contamination on a neighboring parcel becomes a REC for your property only when it is present or likely present at your property.
CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act, the federal Superfund law) has a separate contiguous property owner protection for land contaminated only by migration from a neighbor, but it is open only to an owner who did not know or have reason to know of that contamination when buying (42 U.S.C. 9607(q)(1)(A)(viii)). A buyer whose Phase I identifies the migration may still qualify as a bona fide prospective purchaser (BFPP) under 42 U.S.C. 9607(q)(1)(C). Ask your attorney which protection applies.
The federal rule uses different words. 40 CFR 312.21(c)(1) requires the report to give an opinion on whether the inquiry identified “conditions indicative of releases or threatened releases” at the property. “REC” is ASTM’s term for that finding, and EPA has said there are no legally significant differences between E1527-21 and the rule (87 FR 76580).
What changed from E1527-13
| Point | E1527-13 | E1527-21 |
|---|---|---|
| Status for AAI | Recognized only until February 13, 2024 | The current standard for commercial property |
| Structure | One test: presence or likely presence “in, on or at a property” in three situations | Three separate tests, each naming “the subject property” |
| “Conditions indicative of a release” | A separate trigger (the second situation) | Removed |
| “Likely” | Applied to all three situations, not defined | Used only in the second test, and defined |
| De minimis conditions | Not RECs | Not RECs |
The status row comes from 40 CFR 312.11 and the E1527-13 de minimis entry from a 2014 Willkie Farr & Gallagher article. The rest comes from the Mitchell Williams presentation, which quotes both definitions. EPA calls the REC, HREC and CREC definitions reworded, with their concepts and ramifications unchanged (EPA comparison document, p. 2).
Older wording still circulates. An EPA brownfields guide last updated May 5, 2026 labels as E1527-13 a definition built on conditions that “indicate an existing release, a past release, or a material threat of a release,” wording EPA’s own 2013 rule used for the earlier E1527-05. The page also still says the AAI rule recognizes E1527-13, which has not been true since February 13, 2024 (EPA Revitalization-Ready Guide, Chapter 3; 78 FR 79322). If the REC definition in a report you rely on uses either older wording, ask the EP which edition of E1527 the report follows. The AAI rule’s own phrase, “conditions indicative of releases or threatened releases,” is current federal wording, not an outdated definition.
Historical recognized environmental condition (HREC)
In paraphrase, an HREC is a past release of hazardous substances or petroleum products affecting the property that the regulator considers addressed and that also meets the regulator’s criteria for unrestricted use, with no controls on the property such as activity and use limitations (see the definition quoted in the Mitchell Williams presentation). An example is a tank removed under a state “no further action” letter that was based on cleanup to unrestricted use standards, with no deed restriction. An HREC is not a REC.
Both conditions are required. A no further action letter does not make an HREC if the closure relied on a use restriction or left contamination above unrestricted use criteria. That condition is usually a CREC, or a REC if the EP finds it was not fully addressed (NEWMOA presentation, slide 17). The split dates to E1527-13, which limited the HREC to releases addressed to allow unrestricted use and added the CREC for the rest (78 FR 79322).
An HREC generally needs no further work, but the EP must first check the closure data against today’s unrestricted use criteria. A past release may no longer qualify if the criteria have changed or a pathway never evaluated, such as vapor, has since been identified (NEWMOA presentation). The EP then reports it as a REC or a CREC instead.
Controlled recognized environmental condition (CREC)
In paraphrase, a CREC is a REC affecting the property that the regulator considers addressed, with hazardous substances or petroleum products allowed to stay in place subject to required controls, such as activity and use limitations or other property use limitations (see the definition quoted in the Partner ESI glossary; EPA used the same “required controls” wording in 78 FR 79322). The controls can be an engineering control (a cap, a vapor barrier), an institutional control (a deed restriction or environmental covenant), or a closure that lets contamination above unrestricted use criteria stay because the property’s use is limited, for example to commercial use. E1527-21 calls such restrictions property use limitations (NEWMOA presentation).
A CREC is a type of REC, so it appears in the Conclusions with the other RECs. Buyers should know two things. The EP identifies the document that imposes the control but does not confirm that the control is adequate, implemented or still effective. And a CREC can stop being one after a change in regulatory criteria, a change of use or a newly identified migration pathway (Partner ESI glossary, quoting the standard’s discussion of the term).
The EP’s opinion on further investigation covers a CREC like any other REC, and its controls stay with the property whatever that opinion says. A buyer relying on the BFPP defense must comply with land use restrictions established or relied on in the response action and must not impede institutional controls (42 U.S.C. 9601(40)(B)(vi)). Tim Haley, an attorney on the E1527 task group who co-led its legal appendix group, makes a related point: whether a finding is a REC or a CREC, the buyer must meet whatever continuing obligations apply to keep BFPP status (LightBox Q&A).
On an SBA loan with known Contamination at the property (in SBA’s definition, hazardous substances present in quantities or conditions that make the property subject, or potentially subject, to a government directive or order), a lender seeking approval or disbursement authority must discuss in its recommendation to SBA any institutional and engineering controls and their impact on repayment ability, collateral value and marketability (SOP 50 10 8.1, Section A, Chapter 5, Paragraph E.5.c.iii, and Appendix 4).
De minimis conditions
E1527-21 describes a de minimis condition as a condition related to a release that generally does not threaten human health or the environment and generally would not be the subject of an enforcement action if regulators learned of it (National Law Review). The standard says a de minimis condition is not a REC, so it is not a CREC either (ASTM E1527-21, Section 1.1.1). The federal rule has a parallel: the report is not required to identify quantities of substances that generally would not pose a threat (40 CFR 312.20(h)).
The key words are “related to a release.” Properly stored maintenance chemicals with no spill are not a de minimis condition, because nothing has been released. The report may still note them among its site observations (EPA comparison document, p. 2), and they become a REC only if their condition poses a material threat of a release.
A typical example is minor, superficial oil staining on intact pavement; the Partner ESI glossary gives a similar one, a small, superficial oil spill not expected to cause significant concern. Whether a condition is de minimis is the EP’s judgment, as Elizabeth Krol, a member of the E1527 task group, put it (LightBox Q&A). The report must photograph it and explain the call in its Opinions section (EPA comparison document, pp. 8 and 12).
How the Environmental Professional decides which label applies
Appendix X4 of E1527-21 includes a flow chart for sorting findings, intended to make EPs more consistent, though it does not remove all variation between them (Mitchell Williams presentation). The steps below are our summary of that chart as reproduced in the NEWMOA presentation (slide 16), worded to match the definitions above. They are not ASTM’s text.
- Are hazardous substances or petroleum products present, or likely present, at the property because of a release or likely release? If yes, go to step 2. If not, ask whether substances on the property pose a material threat of a future release, as with corroded drums or a failing tank that has not yet leaked: if they do, it is a REC; if not, it is not a REC.
- Does the release generally pose no threat to health or the environment, and would it generally not draw enforcement if regulators knew? If both are true, it is a de minimis condition, not a REC. If either is not, go to step 3.
- Has the release been addressed to the regulator’s satisfaction? If not, it is a REC. If it has, go to step 4.
- Was it addressed to unrestricted use criteria, with no controls on the property? If yes, it is an HREC, not a REC, but only after the EP confirms it is not a REC or CREC under current criteria. If no, it is a CREC, which is a REC.
The EP must explain the reasoning for each classification in the report’s Opinions section (EPA comparison document, p. 12).
Examples: how common findings are usually classified
The table applies the definitions to findings that come up often. These are illustrations, not rules; the EP decides on the evidence for the specific property.
| Finding | Usual classification | Why |
|---|---|---|
| Open leaking underground storage tank case on the property | REC | A release, not yet addressed to the regulator’s satisfaction |
| Former gas station in old city directories, no record the tanks were removed | Usually a REC | Petroleum likely present from a likely release, and tanks left in place may threaten a future release |
| Tanks removed, no further action letter, cleanup met unrestricted use criteria, no deed restriction | HREC | Addressed and unrestricted, once the EP confirms the closure meets current criteria and no new pathway applies |
| Same closure, but the letter relies on a deed restriction to commercial use and a ban on groundwater wells | CREC | Contamination left in place under property use limitations |
| Solvent release at an upgradient dry cleaner on the next parcel | REC if the EP judges solvent likely present beneath the property | The test is presence or likely presence at the subject property |
| Corroded drums of waste solvent on bare soil with no secondary containment | REC | Conditions that pose a material threat of a future release, or a release if they have leaked |
| Minor, superficial oil staining on intact asphalt in a parking lot | Usually de minimis | Related to a release, but generally no threat and no enforcement interest |
| A locked building the site visit could not enter, past use unknown | Data gap, not a REC | Significant if activities inside could have created a REC |
Data gaps and significant data gaps
A data gap is a lack of, or inability to obtain, information the AAI rule requires despite good faith efforts (40 CFR 312.10). It can come from any part of the work: an owner who will not be interviewed, historical records missing for decades, a locked building. The report must identify data gaps and comment on their significance to the EP’s opinion (40 CFR 312.21(c)(2)).
A significant data gap is one that affects the EP’s ability to identify a REC. A gap is not significant by itself; it becomes significant when other information or experience raises a reasonable concern about its effect on the opinion (EPA comparison document, pp. 5 and 7). One example is a building that could not be entered during the site visit (National Law Review). Significant data gaps are listed in the Conclusions and are worth a conversation before closing.
A data gap is not a REC, but missing records can combine with other evidence to support one: if directories show a service station on the property in the 1960s and nothing shows the tanks were removed, the EP may judge a release likely. If your report calls a gap a REC, ask the EP which part of the definition the call relies on.
Vapor migration
In 2013, EPA wrote that ASTM’s E1527-13 revisions clarify that All Appropriate Inquiries and Phase I assessments must include an assessment of the real or potential occurrence of vapor migration, and that in EPA’s view vapor migration has always been a relevant potential source of release that, depending on site conditions, may warrant identification (78 FR 79321-79322). Vapor migration can support a REC, and a newly identified vapor pathway can take an old HREC or CREC out of that category.
Our Phase I ESA includes consideration of potential vapor migration as part of the ASTM E1527-21 assessment. The Environmental Professional uses the same records, history, interviews and site observations as the rest of the report to judge whether vapor from a release on or near the property may be migrating in the subsurface. This does not include vapor sampling, indoor-air testing or a separate ASTM E2600 vapor encroachment screen; E2600-22 is a guide that can be used with a Phase I or on its own and does not define Phase I scope (ASTM E2600-22, Sections 1.1 and 4.2.2).
What happens after a REC
- Read the opinion on further investigation. E1527-21 calls for the EP’s opinion on whether additional investigation may be appropriate; EPA notes that a specific recommended course of action is not required and falls outside the scope of the Phase I standard (EPA comparison document, pp. 3 and 8). For an SBA loan, the Phase I must conclude that the risk is either so minimal that no further investigation is warranted or enough to warrant more, and the EP should describe any recommendation in detail (SOP 50 10 8.1, Appendix 4). The SOP’s rule for Phase I results calls the next step “typically a Phase II” (SOP 50 10 8.1, Section A, Chapter 5, Paragraph E.4.e).
- Get a scope and fixed bids. A Phase II ESA samples soil, groundwater or soil vapor where the REC points. SBA defines it by reference to ASTM E1903-19 (2020) and also accepts a Phase II done to generally accepted industry practice with a scope reasonable and sufficient to identify the presence, nature and extent of a release (SOP 50 10 8.1, Appendix 4). We scope the Phase II from the Phase I findings, obtain fixed bids from licensed partners and coordinate the work, so you keep one point of contact.
- Talk to the lender early. For SBA loans the rules are written down (see SBA environmental requirements). If the EP concludes further investigation is warranted and the lender still wants to make the loan, the lender must proceed as the EP recommends or request an exception to policy from SBA’s Environmental Committee, which the SOP expects only in rare instances. SBA requires compliance with all of the EP’s recommendations, including housekeeping measures such as secondary containment, decommissioning monitoring wells and sealing floor drains (SOP 50 10 8.1, Section A, Chapter 5, Paragraph E.4.e). With known Contamination at the property, the loan cannot be approved or disbursed unless the risks have been minimized to SBA’s satisfaction, and SBA relies on one or more of 9 listed mitigating factors, such as an indemnification agreement, a no further action letter or an escrow of at least 150 percent of the estimated remediation cost (Paragraphs E.5 and E.5.d). Other lenders apply their own credit policies, so ask what they need before you order more work.
- Do not sit on a REC after closing. A Phase I satisfies one requirement for CERCLA’s landowner liability protections; it does not preserve them by itself (ASTM E1527-21, Sections 1.1 and 1.1.3). For most buyers the relevant protection is the BFPP defense, which also requires the buyer’s own inquiries and continuing obligations after purchase, including reasonable steps to stop continuing releases, prevent threatened ones and limit exposure (42 U.S.C. 9601(40)(B)). EPA’s enforcement guidance cites a 2013 federal appeals court decision, PCS Nitrogen, Inc. v. Ashley II of Charleston, LLC, holding that a developer that waited a year to clean out and fill sumps identified as a REC had not taken reasonable steps (EPA Common Elements guidance, Attachment B, p. 6). Ask an environmental attorney what a specific REC requires of you.
- Keep the clock in mind. Under 40 CFR 312.20, five components (the interviews, the environmental lien search, the government records review, the site visit and the EP’s declaration) must be conducted or updated within 180 days before you acquire the property, and every part of the inquiry within one year. The clocks run from the component dates, not the report date (ASTM E1527-21, Section 4.6.3); our guide to the Phase I 180-day rule walks through the dates. If Phase II work pushes closing more than 180 days past the earliest of those components, you will need a Phase I update; if it pushes closing more than one year past the oldest work in the inquiry, an update cannot help and you will need a new Phase I. For SBA purposes, SBA will accept for review an otherwise AAI-compliant Phase I dated within one year of the date the SBA loan number is issued, notwithstanding the 180-day rule, while noting that parties may still want to meet EPA’s timeframes to protect their legal position (SOP 50 10 8.1, Appendix 4).
Sources
- ASTM E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (scope and significance), ASTM International, accessed October 2026
- 40 CFR Part 312, Innocent Landowners, Standards for Conducting All Appropriate Inquiries (Sections 312.10, 312.11, 312.20, 312.21), Electronic Code of Federal Regulations, accessed October 2026
- Comparison of All Appropriate Inquiries Regulation, the ASTM E1527-13 Phase I Environmental Site Assessment Process, and ASTM E1527-21 Phase I Environmental Site Assessment Process, U.S. EPA docket document for EPA-HQ-OLEM-2021-0946 (copy hosted by the Wisconsin Department of Natural Resources), accessed October 2026
- Standards and Practices for All Appropriate Inquiries, final rule, 87 FR 76578 (December 15, 2022), Federal Register, accessed October 2026
- Amendment to Standards and Practices for All Appropriate Inquiries Under CERCLA, 78 FR 79319 (December 30, 2013), Federal Register, accessed October 2026
- Recent Updates to ASTM E1527-21 (presentation), Thomas Huetter, P.G., hosted by Mitchell Williams, accessed October 2026
- ASTM Update: E-1527-21 (presentation, NEWMOA webinar, May 23, 2023), Elizabeth Krol, Ramboll, for the Northeast Waste Management Officials’ Association, accessed October 2026
- New Environmental Due Diligence Requirements To Qualify For Purchase Liability Protections, William L. Thomas and Annise Maguire, Willkie Farr & Gallagher LLP, The Metropolitan Corporate Counsel, February 2014, accessed October 2026
- Controlled Recognized Environmental Condition (CREC), Partner Engineering and Science glossary, accessed October 2026
- De Minimis Conditions, Partner Engineering and Science glossary, accessed October 2026
- Q&A from LightBox’s October 2021 Webinar, LightBox, December 13, 2021, accessed October 2026
- The New ASTM E1527-21 Standard Practice for Phase I Environmental Site Assessments (ESA), David P. Ruetz, National Law Review, November 18, 2021, accessed October 2026
- Enforcement Discretion Guidance Regarding Statutory Criteria for Those Who May Qualify as CERCLA Bona Fide Prospective Purchasers, Contiguous Property Owners, or Innocent Landowners (“Common Elements”), U.S. EPA, July 29, 2019, accessed October 2026
- 42 U.S.C. 9601, Definitions (CERCLA section 101), U.S. Code 2024 edition, U.S. Government Publishing Office, accessed October 2026
- 42 U.S.C. 9607, Liability (CERCLA section 107), U.S. Code 2024 edition, U.S. Government Publishing Office, accessed October 2026
- SOP 50 10 8.1, Lender and Development Company Loan Programs, with Technical Policy Updates, effective October 1, 2026 (Word document), U.S. Small Business Administration, accessed October 2026
- ASTM E2600-22, Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions (scope and significance), ASTM International, accessed October 2026
- Revitalization-Ready Guide, Chapter 3: Reuse Assessment, U.S. EPA, last updated May 5, 2026, accessed October 2026