Warning: Danger Below : Environmental consultants are popping up to help developers sniff out hazardous waste on sites before they buy and build.

As routinely as house hunters study termite reports, companies shopping for commercial real estate now buy and scrutinize environmental assessments of target properties. And peering over their shoulders are their bankers--with good reason.

Hazardous waste cleanup can be expensive. The word that no one wants to read is remediation, a term that all too often in Southern California appears on orders from a local, state or federal agency to rid a property of contamination before anything else can be done with it. “Any remediation (that costs) less than a couple of million bucks is a small problem,” says O. P. Ghuman of Woodward-Clyde Consultants in Santa Ana. “A couple of million to 20, I’d put in the moderate range. And there’s one heck of a lot above 20.”

Ghuman is vice president and consulting principal of Woodward-Clyde, which along with such other established firms as Dames & Moore, International Technology Corp. and McLaren Environmental Engineering, do environmental site assessments. Ghuman is considered an old-timer in this still-new business, having produced these reports for the past seven years.

The field is so new that virtually no one knows how big it is in terms of sales, or even how many companies are in it. Estimates run from 25 to 250 for the number of consultants practicing in Southern California. And the level of expertise among the practitioners is equally uncertain.

“This is one of the last unregulated professions,” says Joel Moskowitz, partner in charge of national environmental practice for Gibson, Dunn & Crutcher, California’s largest law firm. No certification or license is required. “If you’re tired of being a barber, or a chef,” says Moskowitz, “and you want to enter a field with unlimited opportunity, become an environmental consultant.”

The state Office of Environmental Affairs has established a voluntary registry of environmental consultants, however, and it lists 1,059 consultants in California who have satisfied the office that they have significant expertise in real estate assessments.

The misnamed Love Canal and other environmental disasters of the 1970s prompted passage in 1980 of the Superfund law, technically known as the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA. This made owners responsible for whatever hidden horrors turned up on their land, even if the substances were deposited before they owned the property and even if they knew nothing of their existence. Beyond federal law, at least a dozen states have passed their own statutes. In California, for example, failure to tell a buyer in writing of the presence of hazardous materials can bring a $5,000 fine.

And in recent years, when these horrors have been so expensive to remove that they forced some owners to go belly up, lenders--either commercial banks or mortgage holders in the secondary market--have been held liable. A series of court decisions has made it clear that banks may face the unhappy choice of either foreclosing on a property that they will then have to clean up themselves or deciding not to foreclose and taking a loss on the loan.

Later laws have modified the extent of an owners’ liability, especially if they show legal due diligence--often just by having an environmental assessment done--before buying a commercial site.

Yet this has also made environmental assessments even more important. Five years ago, only a few thoughtful buyers and lenders might have paid for an assessment. Now, it’s a rare piece of commercial real estate that is sold to a new owner without one.

“Most commercial banks started 12 to 18 months ago developing policies or implementing them,” says Evan C. Henry, manager of environmental services for BankAmerica. While BankAmerica reserves the right to ask for environmental assessments even on single-family residential loans, notes Henry, it only requires them as a blanket policy on commercial deals of $1 million or more.

“Our policy requires that borrowers illustrate to us that their collateral is acceptable as real estate security,” Henry says. “We do not make any judgments or pronouncements as to whether a site is clean or contaminated. We strictly get the information provided to us by the borrower.”

“And the environmental risk assessment,” Henry adds, “though it can be significant in some cases, is only one part of determining the credit-worthiness of a borrower.”

BankAmerica and other lenders normally require what’s called a phase one assessment. This is a report based on a study of various records of the site, as well as physical inspection of the premises, but without actually sampling the soil, water or air. Although costs vary widely, typical phase one “due diligence” reports, as they are often called, run $5,000 to $10,000.

Aerial photographs dug out of libraries can help fill in a site’s history. Interviews with present and former workers and, more rarely, neighbors, can be useful. And the sharp eye of a consultant with experience in the particular industry or business that was once run on the site can often spot telltale signs of sloppy handling of hazardous substances.

“The most important element (in a report) is just knowledge Ghuman. “We have people who know that if steel was made at this site, what kinds of operations would have had to be conducted.”

And then there are the records kept by various public agencies over the years. Permit agencies keep their own histories. Even a title search can turn up a suspicious detail.

Developers, naturally enough, would like to learn of a site’s sordid past well before taking out construction permits. By then, too much may be committed to pull away from the deal.

“We had one site that had been used by the federal government,” recalls Lindell Marsh, of Siemon, Larsen & Marsh, Newport Beach-based attorneys who handle commercial real estate transfers. “And it turned out to be used for munitions disposal, though no one knows exactly. But what was suspected was that at the end of the war, they just dumped a lot of these old weapons in a hole, then covered them over with municipal waste. And when the developer tried to put up condominiums, it took $3.5 million to clean it up.”

Sometimes a site’s general location is enough to cause consultants to give the land an especially careful look.

Alistaire B. Callender, a senior project scientist at Woodward-Clyde, cites Carson as a place requiring special care, because it is “an area where there’s a lot of industrial, a lot of oil field activity. Santa Fe Springs is, too, as opposed to south Orange County, where it was primarily agricultural.”

Phase two studies, which are usually undertaken only when something in a phase one review smells (sometimes literally), involve laboratory work on soil, water and (rarely) air samples. They can easily cost 10 times the price of a phase one report.

Often, potential buyers back out of a deal when even a potentially suspicious former use pops up in a phase one report, notes Ghuman of Woodward-Clyde. The horror stories of land that takes more to clean up than it’s worth afterward are too numerous to ignore.

Dan Noble, vice president of EnviroQuest Information Services and financial editor of Environmental Business Journal, recalls a small chunk of former agricultural land that cost $40,000 to buy, then an additional $100,000 to clean up when hazardous materials were found.

“There are properties like that all around L.A.,” says Noble, “and there they sit, because no one wants to accept the liability.”