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Joe and Jill Brown buy a
beautiful home on three acres only to discover a year later that their backyard
is contaminated with a dangerous pollutant. The chemical has begun to leach
into their drinking water and they're afraid for their health and the health of
their children, not to mention their plummeting property value. What can they
do?
The Browns have discovered one of the most legally dangerous areas in real
estate today: environmental pollution on residential property. Liability laws
are written such that unsuspecting home buyers, sellers and lenders may become
responsible for millions of dollars in damages and clean-up—even though the
pollution may have occurred years before any of the current parties were
involved.
People often think that hazardous waste and toxic chemical problems only occur
on industrial properties. Unfortunately, they're wrong. In the course of
conducting over 50,000 residential inspections, we have seen many homes
contaminated with soil, groundwater and other environmental pollution.
Photography, gardening and other surprising pollution-makers
Because of the toxic chemicals involved, hobbies like photography and home
brewing, and home businesses such as auto repair and furniture stripping, can
cause site pollution. Pesticides and herbicides--the gardener's helpmates--can
also contaminate soil. When waste water or sewage disposal is located near
water wells, pollutants may migrate into the water supply. And overhead power
lines and transformers can emit electromagnetic radiation and other health
hazards.
Indoors, unlikely sources such as carpeting, carpet pads, humidifiers, and
heating and cooling equipment may produce pollutants. And despite their charm,
older homes often harbor additional problems. For example, asbestos, found in
the heating systems, chimneys and floor and ceiling materials, and lead, found
in the paint and plumbing, can pose risks.
Homeowner and lender liability
Testing for these problems can be quite inexpensive, but the solutions are
never cheap. Under a complex EPA guideline called the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), an owner of a
contaminated property is strictly liable for the entire cost of clean-up--even
when someone else caused the pollution!
Even though there is an "innocent landowner defense" under CERCLA, it
requires that the purchaser didn't contribute to the pollution problem AND that
before obtaining the property, he or she conducted a thorough investigation
that failed to disclose the problem.
This means that banks are at risk, too. Lenders who have foreclosed on
contaminated properties or who have received a deed-in-lieu can be held liable
under CERCLA. Moreover, in addition to the liability for the clean-up, a lender
who acquires a contaminated property may also be liable for damages caused by
the pollution to other property owners or persons.
The environmental review and other liability safeguards
So what can buyers, sellers and lenders do to protect themselves from this
sort of liability? First and most important, they should consider getting an
environmental review (a Phase 1 environmental site assessment) of the property
before they acquire it. They should also consider obtaining warranties,
limitations of liability and covenants against any hazardous materials on the
property, together with indemnification agreements whenever possible.
Finally, they should also look into the availability and cost of insurance that
protects owners against problems like these.
Today's buyers, sellers and lenders are in a most difficult situation. While
the steps outlined above don't guarantee protection (insurance may not be
available or cost-prohibitive, and warranties are only as valuable as the
financial strength of the company who grants them), they can help.
Environmental audits, however, are an essential form of protection against
environmental hazards liability.
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Eight Home Hazards
Starring, in alphabetical order
Asbestos. This thermal insulation material is typically found on heating
system components, wall and ceiling materials, floor coverings and certain
adhesives. Government regulations make removal and disposal complicated and
costly. Inspections can determine the presence or absence of asbestos and
identify its types, quantities and conditions.
Electromagnetic Fields. The EPA has determined that high-power
electrical line emissions are capable of causing leukemia and brain cancer.
Simple testing can identify EMF levels and risks.
Indoor Air Pollution. Did you know that the air in homes and other
buildings can be more seriously polluted than the outdoor air in big cities?
The two major causes of poor indoor air quality, which at best makes people
feel unwell and at worst causes or exacerbates life-threatening illnesses, are
contaminants such as asbestos and radon and inadequate ventilation systems. A
thorough inspection will point out potential pollution sources and advise
further testing when necessary.
Lead. Toxic concentrations of lead, typically found in older paint and
plumbing, can also pose health hazards. Lead can impair mental and physical
development in fetuses and young children, as well as decrease coordination,
damage the kidneys and nervous system and increase high blood pressure. Simple
testing can identify its location, condition and appropriate remedial action.
PCB's. Polychlorinatedbi-phenyls~liquid insulating materials previously
used in fluorescent lighting parts and electrical transformers are highly toxic
and difficult to remove, transport and dispose of. Inspection, however, is
simple and relatively inexpensive.
Radon Gas. Ubiquitous radon is an invisible, odorless, cancer-causing
gas produced by radioactive elements as they decompose. Simple alpha-detection
tests can determine radon concentration within 48 hours.
Soil Contamination. Drilled sampling and laboratory analysis can
identify the presence (or absence) of soil contamination, typically caused by
improper hazardous waste disposal. Testing can identify run-off or seepage from
agriculture, mining, oil and gas activities, underground tanks and natural
pollutants. Subsequent environmental reports can evaluate the health hazards
and propose remedies.
Urea. Formaldehyde Foam Insulation (UFFI). Commonly used in the late
1970s and early 1980s, this dangerous insulation material releases toxic gases,
which in turn can produce respiratory irritation. On-site air sampling and
solid sample analyses of suspect materials can yield useful information about
UFFI in your home.
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