NEW ORLEANS -- State and local governments are passing scores of new environmental protection laws, forcing real estate agents to rethink their legal responsibilities in selling property that may be contaminated in some way.
Agents can and are being sued for not finding environmental hazards on or under property, and for not reporting it to sellers and buyers, environmental experts told gatherings of the National Association of Realtors (NAR) here this week. Not the least of the problems is that property values are often lowered because of the hazards, they said.
Real estate agents who once thought lead paint in property they were trying to sell or their thinking and strategies for cleaning up and selling the properties, the experts said.
Meanwhile, federal laws and regulations already in force are being updated or rewritten, delegates to the annual convention were told.
"Many state laws are stricter than federal law," and differ from state to state, said lawyer James C. Mauch, one of several environmental specialists who spoke at the NAR meetings.
Realtors and sales agents crowded several sessions on environmental problems.
"A year ago brokers were a lot more hostile," as well as unconvinced, when speakers at NAR-sponsored meetings said they could be held responsible for environmental damage to property, said James M. Savidge, who works for a Clearwater, Fla., environmental services company and spoke to a group of agents this week. "But today they really wanted to learn."
"Brokers have reason to be nervous, to be concerned," said Laurene K. Janik, the NAR's general counsel. Although there have been only a few lawsuits against brokers so far, "I'm sure those cases are coming," she said.
California and Maine have passed laws that require sellers of property to publicly disclose any environmental problems on their property.
The NAR "is very excited about" these laws and many association members will be pushing for similar legislation in other states, said Dorcas T. Helfant, a Virginia Beach Realtor who has been elected the association's 1992 president.
"Under all is the land" is an NAR motto and "now we are recognizing that what's under the land is important," Helfant said.
The association distributed a new environmental guide that outlined real estate sales agents' responsibilities in searching for and disclosing environmental hazards. The guide said agents can be held liable under federal and state laws if they do not tell buyers and sellers about hazardous substances they should have seen and reported.
The guide also advises agents on how to look for the most common hazards, including asbestos, radon, lead paint, groundwater contamination and formaldehyde gas, and what to do when they find it.
Janik said agents must "conduct a reasonable, visual inspection" of property and most states now say an agent who spots indications of possible environmental contamination has a duty to question the property owner.
Some states go further. When a property owner in the state of Washington, for example, says that no environmental hazards are present on his property, the real estate broker has a duty to ask how the owner knows this to be true, according to Mark Zemelman, a California-based lawyer who spoke at one environmental session.
If an agent knows about possible problems and does nothing about it, he or she could be liable under nonenvironmental statutes covering negligence, fraud or misrepresentation, Janik said.
A case in California several years ago is an example. The value of a hillside home dropped sharply after a landslide occurred in the area and the owners sued the broker who sold them the house. The court decided the broker was liable because netting stretched across parts of the hillside was an indication of landslide danger and should have prompted the broker to investigate.
Since the National Environmental Policy Act was passed in 1969, a number of cleanup laws have been enacted. The federal Superfund Act, passed in 1980 and reauthorized in 1986 to eliminate dangerous waste sites, says that the present owner of a site and any previous owners who were there when hazardous substances were released can be made to pay for the cleanup.
Firms or individuals who transported the materials to the site and, in some cases, financial institutions who made loans on property also have been held liable.
The reason for these laws, Zemelman said, is that "Congress doesn't want the cleanup to come out of taxpayers' pockets."
Maryland and Virginia require that notice of hazardous waste activities or materials on the property in the past be filed in the local government office where documents are examined during a title search, according to a report by Sue K. Willman, an environmental and real estate lawyer. Maryland also has a general lien law that gives the state government the right to use proceeds from sale of the property to cover cleanup costs.
Willman advised real estate agents working with property owners to "stay as uninvolved in the technical aspects as you possibly can" as one way to avoid liability. She said environmental problems may not be getting worse, but instead are "becoming overwhelming because we're remedying past uses and abuses."
The Environmental Protection Agency believes, for example, that lead paint is present in 42 million homes in the United States and that more than 12 million children younger than age 7 live in these dwellings.
The agency also has reported that 1.5 million to 2 million underground storage tanks are now in use and that only a small percentage are protected against corrosion. The agency also estimates that about 100,000 tanks are leaking now and the number is rising rapidly, posing significant danger to the nearby soil and water supplies.
"Even a slow leak of one gallon per day can contaminate the water of a 50,000-person community to the point of endangering public health," according to the NAR's new environmental guide.
Most environmental laws regulate commercial property, but residential brokers can get involved when housing developments are built on land once used for commercial purposes and contaminated by chemical waste or other pollutants.
The infamous Tanglewood community built near Conroe, Tex., in the 1980s is still being used as an example of what builders, lenders and real estate agents should always avoid. With a loan from a Texas savings and loan, the developer bought property and built medium- and high-priced homes on it.
An environmental services company later reported that "although it was apparent that there had been prior commercial activity on the site, the pits, ponds and other disposal areas ... were dozed and backfilled to create the rolling topography desirable for the subdivision."
After homes were built and families moved in, many residents became ill and when state authorities investigated, they found that a wood-treatment plant had operated on the property for 25 years. The new houses had been built over pits containing creosote and other toxic waste materials.
In the lawsuit that followed these discoveries, a federal appeals court ruled that the real estate agent, lender, developer and construction company all could be sued for the cost of the cleanup and damages to the homeowners under the Superfund Act.