Environmental Hazards in Real Property Dan J. Harkey

Summary:

Understanding environmental hazards in real property is not just a matter of concern but a crucial and complex task. It involves a maze of risks, consequences, and regulations that demand the expertise of environmental science professionals to guide interested parties to the best solutions. This understanding is paramount in the real estate industry, as it can significantly impact property value and potential legal liabilities.

Risks may stem from the property's or surrounding properties' historic uses, potentially leading to long-term consequences. The materials used in the original construction and the current property usage by one or more tenants also pose significant risks.

The risks may be above or below ground, in groundwaters, the air, and construction materials, like a giant squid with tentacles reaching far and wide, with liability overlays and use limitations.

Any real property practitioner should familiarize themselves with the basic understanding of regulatory compliance and act as a prudent fiduciary for their clients.

Article:

Non-compliance with environmental regulations could result in a property where the cost of mitigation exceeds its value. This could trigger litigation against the real estate agent (associate licensees), the real estate/Mortgage Brokerage firm, and its responsible broker, alleging negligence, breach of fiduciary duty, and constructive fraud. The brokerage firm and its agents (defendants) should have been aware of the significant risks but failed to disclose them, underscoring the importance of environmental regulations. The potential legal implications could include hefty fines, loss of reputation, and even suspension or revocation of professional licenses. These consequences have a financial impact and tarnish the professional reputation and credibility of the individuals and firms involved.

The potential for litigation due to a fiduciary's failure to disclose all material facts or engage in negligent misrepresentation should serve as a stark reminder of the need for thoroughness and caution in all real estate transactions. Breaches of fiduciary duty can result in substantial financial losses, damage to a professional's reputation, and even legal action. For instance, failure to disclose material facts such as property defects, cracks in the foundation, land slippage, noise, and conflicts with neighbors can be considered a breach of fiduciary duty, potentially leading to legal action and financial losses. This emphasis on potential consequences should instill a sense of urgency in the audience, underscoring the importance of regulatory compliance and the possible risks associated with non-compliance.

Assessment and Remediation of various contaminants have emerged, and an entire industry of companies specializing in the evaluation and removal of toxic materials has developed.

Why should I be concerned about things that happened long ago?

An overlay of liability covers owners, tenants, agents, real property lenders, insurance companies, and surrounding properties extending through entire neighborhoods and municipalities.

Who do I turn to for help in identifying the risks?

Specialists licensed as environmental engineers are the go-to professionals when identifying ecological risks, reporting and assessing mitigation procedures, and communicating with property owners and agents. They work with contractors and the Environmental Protection Agency (EPA) to ensure environmental compliance, providing a reassuring and confident resource for the real estate industry.

What is an environmental professional?

An experienced specialist who draws from chemistry, ecology, geology, hydraulics, hydrology, microbiology, economics, and mathematics to identify, report, and mitigate environmental issues relating to real properties.

The fiduciary responsibility of real estate agents, brokerage firms, and the responsible broker about environmental issues.

Whether in real estate sales or lending (at real estate/mortgage brokerage firms), the responsible brokers and their agents are fiduciaries of their clients/principals. They are legally and ethically accountable for acting on behalf of others to the highest standards and in the best interest of the clients/principals they serve.

Breaches of fiduciary duty occur when the agent acts in their best interest and damages the principal. Many actions by the agent will be deemed as a breach:

Failure to disclose material facts, such as property defects, cracks in the foundation, land slippage, noise, and conflicts with neighbors, among others, can be considered a breach of fiduciary duty.
Receiving secret profits and fees
Withholding offers for self-gain

What is a Phase I environmental site assessment?

An environmental professional conducting a Phase I environmental site assessment performs a thorough, preliminary, non-intrusive review. This includes a comprehensive examination of public records, past uses of the subject property, surrounding properties, and a site inspection. The thoroughness of this process should instill a sense of security and confidence in the audience about the comprehensive nature of the assessment.
The report will be available to the principals, property owners, lenders, loan agents, and real estate agents.
The purpose is to identify environmental conditions (RECs) or risks.
RECs are defined as the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or potential release to the environment; or the presence of hazardous substances or petroleum products in, on or at the subject property under conditions that pose a material threat of a future release to the environment.[PC1]

What is a Phase II environmental site assessment?

If concerns are discovered in the Phase I process, a Phase II environmental site assessment should be ordered. The process involves gathering more detailed information, including soil borings, analysis of soil samples, vapor groundwater, and/or indoor air, to evaluate the nature and extent of any existing contamination and recommend clean-up requirements.
A report will contain a detailed description of the contamination, its severity, the cleanup requirements, and recommendations for further investigation.

What is a Phase III environmental site assessment?

Upon completing Phases I and II, the environmental professional will recommend site mitigation/remediation. This will include alternatives, relative costs, timing, and a final analysis of a remediation action plan required to address the contaminant and hazardous issues.
This Phase III assessment is crucial as it provides a roadmap for decontaminating the site, including the cost, timing, and reporting procedures to the EPA, ensuring a thorough and effective remediation process.
The environmental professional will provide a roadmap for decontaminating the site, including the cost, timing, and reporting procedures to the regulatory oversight agency.

Stories about breaches are a giant reservoir of sorrow and financial losses:

www.dre.ca.gov/files/pdf/The_Real_Estate_Brokerage_as_Fiduciary.pdf

www.nar.realtor/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf

Consumer and Agent Education:

www.mynhd.com/booklets/combined_booklets_engl.pdf

www.geo-techsolutions.com/sites/default/files/caleparesidentialenvironmentalhazardsguide.pdf

www.cdph.ca.gov/Programs/CCDPHP/DEODC/CLPPB/CDPH%20Document%20Library/ResEnviroHaz2011.pdf

Federal Oversight:

The U.S. Environmental Protection Agency (EPA) plays a pivotal role in overseeing environmental issues. Its responsibility for developing and enforcing regulations, providing grants, conducting environmental studies, educating the public, and publishing materials underscores the importance of federal oversight in ecological issues. The agency's role is crucial in ensuring environmental compliance and protecting public health and the environment, providing a reassuring and confident resource for the real estate industry.

The EPA oversees the enforcement of baseline regulations, including the Clean Water Act, the Clean Air Act, and the Superfund. RCRA enforces a national standard for using hazardous materials, disposing of dangerous waste, and discharging to the environment.

This should make the audience feel the weight of the agency's role in ensuring environmental compliance at the federal level.

https://www.epa.gov/aboutepa/our-mission-and-what-we-do

GeoTracker is a powerful online resource that every real estate professional should utilize. It provides invaluable information about environmental hazards in a specific area, empowering agents to make informed decisions and advise their clients effectively. GeoTracker can reveal past and present environmental issues, potential risks, and ongoing remediation efforts, giving agents a comprehensive view of the ecological landscape in a particular location.

GeoTracker is an online database system used by the California State Water Board and regional agencies to track and archive compliance data related to waste discharges to land, hazardous substance releases from underground storage tanks, and other environmental monitoring activities. It is a central repository for ecological compliance data with geographic location capabilities. (Real estate/mortgage brokerage firms and their agents) should become familiar with this resource as it can provide valuable information about environmental hazards in a specific area. Using GeoTracker, real estate licensees can access up-to-date information about environmental compliance in a specific location, which enables them to make informed decisions and effectively advise their clients and principals. This tool is invaluable for identifying potential environmental hazards and ensuring regulatory compliance in real estate and mortgage transactions.

https://geotracker.waterboards.ca.gov/map/

There are many, but the basics are as follows.

https://www.epa.vic.gov.au/for-business/how-to/manage-environmental-risk/common-hazards

Environmental Considerations in Real Estate: Managing Risks and Responsibilities - Keven Steinberg Law

Common hazards include air contaminants and toxic and hazardous material discharged into the air from active manufacturing or stationary settings, such as those embedded in real property components.

Asbestos, a common hazard in properties built before 1978, is a serious health risk that can lead to cancer if exposed for a long time. Mitigation is crucial, and the decision to encapsulate or remove it should be made promptly.
Lead-based paint properties: Properties built before 1978 generally contained lead-based paint on the interior and exterior. The federal government banned using lead-based paint in real properties in 1978.
Formaldehyde
Carbon monoxide
Radon--
Industrial pollution--
Land contamination
Groundwater contamination
Adjacent property and neighboring properties within many feet of the subject property.

https://www.cdc.gov/lead-prevention/prevention/paint.html

https://www.epa.gov/lead/protect-your-family-sources-lead#:~:text=In%201978%2C%20the% 20federal%20government,is%20usually%20not%20a%20problem.

https://study.com/academy/lesson/environmental-health-hazards-risks-in-real- estate.html#:~:text=Formaldehyde%20is%20a%20gas%20found,states%20require%20disclosure%20of%20formaldehyde.

Mold is a fungus that can cause respiratory illnesses and even death. It also permanently damages building materials and severely damages property.

Body of law: innocent purchaser

https://law.justia.com/codes/california/2009/hsc/25548-25548.7.html

https://www.chapman.com/publication-Environmental-Lender-Liability-Protection

https://www.epa.gov/sites/default/files/documents/lender-liab-07-fs.pdf