Environmental Hazards in Real Estate

There are several environmental problems that are commonly found on the land, and the law—both federal and state—may assess liability for some of these hazards to the owners, both present and past. Therefore, it would behoove any buyers of property to consider the possibility that there may be environmental problems with the land that may not only reduce the future value of the property, but also incur a great cost later on. The seller of property also has a moral and legal duty to inform any prospective buyers of any known environmental hazards.

Environmental Hazards in the Home

In the past, there were several hazardous materials, or components of materials, used in residential housing, with the main hazards being asbestos, lead, and formaldehyde. In addition, some hazards, such as radon gas and mold, may be more likely due to the location of the land and the construction of the housing.

Asbestos

Asbestos is a mineral that was used as a component in the construction of a wide variety of construction materials, especially insulation, because it was fireproof and a good insulator. It was also used in insulation covering water heaters, pipes, ducts, and furnaces, and was also used in floor tiles, linoleum floors, wallboard material, and for exterior siding and roofing.

Asbestos has subsequently been found to cause lung disease—asbestosis—and cancer, especially mesothelioma, and other problems when breathed. In most cases, the asbestos was contained in the materials and not hazardous, but because it is friable—it tends to splinter into tiny, breathable filaments as it ages—it becomes especially hazardous during remodeling, when the materials may be exposed to the air or manipulated in such a way as to facilitate the dispersal of asbestos filaments such as would occur in replacing the insulation.

Most buyers of real estate should be alert to the possible presence of asbestos in buildings that were built before 1978.

Lead-based Paint and other Lead Hazards

Lead was commonly used to create pigments and paints of various colors, and was also used as the material for water pipes and solder. The paint was commonly used in interior and exterior surfaces of houses, and particularly on doors, windows, and other wood surfaces in most houses built before 1978. High levels of lead from landfills and waste incinerators may also contaminate the water supply.

However, lead is highly toxic, and can accumulate in the body over time. Symptoms of lead poisoning include weakness, anemia, constipation, and a paralysis of the wrists and ankles. Lead has also been found to increase the blood pressure of adults. The main danger from lead is from lead-based paints. Small children sometimes ingest paint flakes that have chipped from interior surfaces and from toys painted with lead-based paints. Lead can harm the brains of children, possibly causing reduced intelligence, impaired memory, delayed motor development, and impaired hearing and balance.

The Lead-Based Paint Hazard Reduction Act (LBPHRA) requires the following for residential real estate transactions:

There are 2 basic types of services provided that can detect the presence of lead in the home: paint inspection and risk assessment. A paint inspection will reveal the lead content of the different types of paints in the home, whereas a risk assessment will detail any serious lead exposures, such as lead dust or peeling paint, and provide information on how to remove the hazards.

More information, including a list of professionals, can be found at the National Lead Information Center. Call 800-424-5323 or visit their website at http://www.epa.gov/lead/nlic.htm.

Formaldehyde

Formaldehyde is a pungent gas extensively used in building materials that can cause respiratory problems, such as wheezing, and can irritate the eyes and skin. It can also cause cancer in animals. Formaldehyde is the major cause of sick building syndrome (SBS), which is an illness caused by poor air quality inside a building, and is characterized by fatigue, headache, nausea, and sensitivity to odors.

The main sources of formaldehyde are as urea-formaldehyde foam insulation (UFFI) that was manufactured in the 1970's and used for insulating houses, which in some states must be disclosed before a sale, and as melamine-formaldehyde resins, which are used to manufacture electrical components and laminated furniture veneers, and to bond wood layers to plywood. Urea-formaldehyde resin is used to attach appliance knobs and to bond wood chips and sheets onto chip board and plywood.

Radon

Radon is a radioactive gas found in the ground, especially in particular areas of the country, that permeates through the pores and interstices of the ground and can enter homes through cracks or other openings below the ground level of a house. If the house is airtight, as many are to conserve energy, the radon gas can accumulate over time and spread throughout the house. However, there is less likely to be any accumulation, if the house is ventilated or has numerous openings to the outside.

The main danger of radon is its radioactivity, which can cause lung cancer because it is breathed in with the air. There are home radon-detection kits that can be used to detect the presence of radon.

Carbon Monoxide

Carbon monoxide is a colorless, odorless and poisonous gas that is created by any type of flame that burns without an adequate amount of oxygen. The main potential source of carbon monoxide in the home is furnaces: gas, oil, or even wood, including fireplaces. Hence, it is important that they are in good working order, and should be properly ventilated and maintained.

Carbon monoxide kills insidiously, causing only mild symptoms of headache, nausea, and fatigue before causing unconsciousness and death, so getting inexpensive carbon monoxide detectors would be prudent.

Mold

Mold is a fungus that can grow, when there is sufficient moisture, on a wide variety of organic substances, such as wood, paper, leather, and even adhesives used in construction. The prevalence of mold in a particular house could be the result of its construction, especially if it is airtight, and allows moisture to accumulate.

Molds can damage the surfaces that they grow on, and may trigger allergic reactions or asthma attacks in susceptible people. Many lawsuits have been filed because of molds. Hence, there may be some liability issues if the home is susceptible to mold growth and it is not disclosed.

Environmental Hazards Outside the Home

The main environmental hazard outside of the home is the presence of hazardous waste on the property, which could possibly create a large liability for the landowner, even if the owner was not responsible for the hazardous waste.

Groundwater

Groundwater is the water beneath the surface of the earth that permeates through the interstices of the ground or flows as underground streams in the form of aquifers. The water table is the surface of the groundwater, and it may be located on the surface or hundreds of feet beneath the surface. Groundwater has 20 times the amount of water that is contained in lakes and streams on the continents' surface, and is the main source of drinking water.

Groundwater is also the main transport for hazardous waste that is buried in the ground or dumped on it, potentially polluting surrounding properties, sometimes for miles. And since groundwater is the source of water for wells, which some property owners use as a source of water, it would be prudent for these property owners to test the water for safety if the property's water supply originates from any source other than the municipal water supply.

Underground Storage Tanks (USTs)

A common environmental hazard is the presence of underground storage tanks, which are used to store motor oil, and in the past, toxic waste from industrial sites. In time, the tanks corrode and start to leak. The location of many USTs has been forgotten, and will eventually leak their toxic contents into the groundwater, creating a potential liability for the landowner.

Environmental Protection

Because of the prevalence of environmental hazards on properties, the U.S. Congress decided to remedy this situation and prevent the creation of more hazards by making landowners, both past and present, liable for any hazardous waste found on property.

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was enacted in 1980, setting up a fund, called the Superfund, of $9 billion to clean up sites containing hazardous wastes, and to identify potential responsible parties (PRPs) to assess liability for the clean-up costs. The program is administered by the Environmental Protection Agency (EPA).

Most PRPs are present and previous landowners of hazardous waste sites. CERCLA liability is strict, retroactive, and joint and several. Strict liability assesses liability to the owner of the land as a matter of law, regardless of whether the landowner was responsible for the hazardous waste. However, if the landowner was not responsible for the hazardous waste, then he can sue those who were responsible to reimburse him for his liability. Retroactive liability extends liability to previous owners, and joint and several liability assesses the entire liability to each responsible party, so if some of the parties are unable to pay for their share of the cleanup, then such deficiencies will be charged to those PRPs who can afford it.

The EPA administers the program by identifying properties with hazardous wastes, then finding the PRPs who would be liable under the law, and informs them of the need for action. The PRPs must decide how to divide up the costs among them. If they do not agree or they do nothing, then the EPA hires its own contractors to do the work, then bills the PRPs. If the PRPs don't pay, then the EPA can seek court damages of up to 3 times the actual cost.

Superfund Amendments and Reauthorization Act (SARA)

One problem that has arisen with CERCLA was that lenders would often find themselves in the chain of ownership of land through the process of foreclosure, creating a hefty liability for the lenders.

After CERCLA expired in September 1985, it was superseded by the Superfund Amendments and Reauthorization Act (SARA) which, besides requiring better cleanup of Superfund sites and increasing the fund to $45 billion, it exempted lenders for liability by granting them an innocent landowner immunity.

To qualify for innocent landowner immunity, the owner must satisfy the following criteria:

An environmental site assessment to determine the possible presence of hazardous waste consists of 2 phases—both phases require an environmental consultant and a lawyer who specializes in environmental issues. Phase I consists of research into previous uses of the site to determine if there is a likelihood that hazardous materials were on the property. If there is the possibility, then a Phase II assessment is conducted to determine the presence of hazardous waste.

Environmental Impact Statement (EIS)

If land is going to be developed and its financing or construction is in anyway supported by the federal government, then an Environmental Impact Statement (EIS), which is an analysis of the expected effects that the development will have on the environment, may be required before development can commence.