Real Estate Professionals And Consumers Add Environmental Land Reports To Housing Due Diligence

Many have seen the movie “Erin Brockovich” or “A Civil Action.” Each follows real people who were grossly impacted by water contaminated when toxins leaked from industrial operations.

Both films account dramatic investigations and multi-million dollar class action lawsuits.  Each demonstrates how environmental contamination can cause diseases like cancer, reproductive afflictions, and family heartache including premature death of family members.  

While most cases of land contamination do not have the drama of a book or movie adaptation, environmental land awareness is valuable for any homeowner. 

Disclosure of land contamination information is also becoming increasingly vital for real estate professionals, home buyers, and home sellers.  Being proactive in seeking this knowledge may save each party from a disclosure lawsuit in the long run, and it may prevent unnecessary exposures to dangerous contaminants.

The commercial real estate industry, the banking and financial industry, the legal industry, environmental engineers and consultants, and government agencies have utilized environmental land data for decades as due diligence in their investment and development work. 

In 2012, a growing number of residential real estate professionals, homeowners, and home buyers are also seeking this data.

Headquartered in Milford, CT, Environmental Data Resources, Incorporated (EDR) was founded in 1991 to support the growing practice of environmental due diligence of commercial real estate.

Jack Huntress, EDR’s Vice President of Residential Services, details the EDR history.

“Firms like EDR initially supported Phase I environmental work by providing ‘toxic site’ database information.  This data includes the location of leaking gas stations, Superfund sites,  dry cleaner releases, landfills, State Hazardous Waste sites and other related databases at both the federal and state level.”

He notes, “EDR made a simple outsourcing solution with its Radius Map that plotted the 1,200 databases that it keeps current through daily, monthly, quarterly and annual updates.”

“Today EDR has become the ‘Band-Aid’ of the Phase I Environmental Site Assessment (ESA) industry and supports the majority of the reports nationwide.  In addition, EDR hosts in person events like the popular Due Diligence at Dawn series in 19 cities, informative webinars, a social community of 7,000 members called commonground and an eLearning platform called commonground University (cgU) to educate professionals on a variety of due diligence practices.”

EDR has moved rapidly to support the growing desire for and needs of environmental due diligence in the residential real estate sector.  Jack Huntress shares his insight.

BKH:  As a leader in the business-to-business (B2B) environmental intelligence industry serving commercial  and government agency clients, what led to EDR’s entering into the business-to-consumer (B2C) or residential client sector?

JH:  Homeowners have been affected by environmental contamination for decades.  The truth is, everyday there are homeowners, on a less publicized scale than in cases that become movies, who are subject to contaminated soil, contaminated groundwater, and the growing concern of vapor intrusion.

Several events precipitated EDR entering the residential market.  In 2001, Landmark, our sister company in the United Kingdom (UK), began supporting solicitors (attorneys) with a screening product after the UK equivalent of the American Bar Association recommended it be part of all residential closings.

About the same time, California passed a Natural Hazard Disclosure law requiring the disclosure of things such as earthquakes, landslide risk, and wildfire risk.  Several states, such as Arizona and Connecticut, were considering environmental disclosure laws.

An additional observation was multi-family housing (anything over four units) was often subject to environmental due diligence based on lending policy.  It was not clear why there should be a due diligence gap between multi-family and single-family in the interest of protecting consumers.

BKH:  How is EDR transitioning the information and reports to the residential client or direct home consumer sector?

JH:  To be quite honest, our data is rather extensive, and most consumers may find it a bit difficult to understand without expert explanation.   I am not sure I would give a Radius Map to my aunt or neighbour and expect they would be able to wade through the technicality of the data and the sheer number of acronyms associated with environmental databases.

Our effort to transition the data for the consumer market began in 2006 with a creation of a consumer friendly product called the neighbourhood Environmental Report (NER).  We have continued to improve the product over the years, but at its core, it distills Radius Map data used for commercial transactions down to twelve pages as opposed to 150 -1000 pages.

BKH:  Consumers have become aware of contamination from mould, lead, Radon, and asbestos in the past decades.  How is an EDR report different?

JH:  That is probably the question we get most often.  Historically, when people consider ‘environmental,’ they immediately think about those issues you listed.  Usually the conversation does not continue to the land, especially the historical use of the land. 

Those in the environmental industry would look at this type of information to screen for risks when buying a home.  However, this awareness has not necessarily expanded to the general consumer.

The data EDR provides focuses on existing or potential impacts to the land from a spill source.  That spill could be anything from a leaking tank at a gas station to a massive Superfund site. 

The result could be contaminated soil or contaminated groundwater migrating onto other properties.  Sometimes this may occur in a plume a mile away from the source.

BKH:  What are the main types of land contamination?

JH:  From a numbers perspective, gas stations and dry cleaners are the most prolific.  In both cases the historical practices and technology were so prone to releases of contamination that many states have special funds set up to address clean up measures now.  These industries pay into these trusts yearly; however, these funds usually barely cover the expenses.

Other contamination sources include landfills, military bases, former manufacturing operations, mining operations, meth labs, and random spills such as the turning over of a truck containing some type of hazardous substance or petroleum product.

BKH:  Do all 50 states have environmental disclosure laws?

JH:  Over half the states do have disclosure laws; however, a number of them do not ask about contamination that relates to the land.  Land contamination issues are missing in this discussion, because disclosure laws cannot address the issue of the lack of knowledge. 

Most sellers are unaware that their property could be impacted, so a form will not help a buyer.  In fact, there is a relevant ongoing story in Connecticut about this very issue.  Connecticut is now in the process of looking at enhanced disclosure legislation to address this concern.

BKH:  Are most real estate professionals and/or sellers aware of historical environmental land information, especially any contamination?

JH:  Because this topic has not generally been a part of the conversation, most brokers and sellers are not aware of contamination information, even though the large majority of it is publically available.

BKH:  Have there been lawsuits regarding contamination liability after a home sale?

JH:  There have been a number of lawsuits against the seller and the brokerage that had the listing.  A recent article published in Bloomberg highlights some of them:

Strawn v. Canuso, 140 N.J. 43 Weichert Realtors

Venezia v. Coldwell Banker Sammis Realty, 270 A.D.2d 480

Chase v. Coldwell Banker Residential, WL 34685236

Vastrano v. Killington Valley Real Estate, 996 A.2d 170

Welch v. Bueler,, 481 N.W.2d 856

Haberstick v. Gordon A. Gundaker Real Estate Co., 921 S.W. 2d 104

Grube v. Daun, 496 N.W. 2d 106

Bloor v. Fritz, 143 Wash.App. 718

Alfieri v. Bertorelli, Case No. 07-056919-CH 

BKH:  How have courts generally ruled on these liability suits?

JH:  The courts are relatively consistent in there being liability on the part of the broker and seller. 

In one of the more well-known cases, Strawn v. Canuso, the NJ Supreme court ruled that the broker “is not only liable to the purchaser for affirmative and intentional misrepresentation, but is also liable for nondisclosure of off-site physical conditions known to it and unknown and not readily observable by the purchaser if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, renders the property substantially less desirable or valuable to an objectively reasonable purchaser.”

In another representative case, Brube v. Daun, the court stated that the broker could not hide behind the ”as is” clause, because he made an affirmative representation about the condition of the property, i.e., that ”the real estate would be suitable for residential, recreation and family purposes.”

BKH:  Who is qualified to report on environmental data?

JH:  In commercial real estate, there is a group of people that may self-identify as Environmental Professionals (EPs) as outlined by the EPA.  In order to qualify as an EP, one must have a certain amount of education and experience.

Understanding whether environmental records of land contamination should matter for a property owner or occupant can be a somewhat complicated task.  Not only does the EP need to consider what was spilled, they must also consider any cleanup action, the depth to groundwater, the direction of groundwater flow, and other considerations.

In a way, this is directly analogous to the home inspector’s effort.  Just as a home inspector evaluates the condition of the home, an EP evaluates the condition of the land.

BKH:  If someone gets a clean report at the time of purchase, are there reasons why individual consumers add environmental land reports to their home due diligence after the purchase?

JH:  Although finding out that there is likely no reason to be concerned about environmental contamination on your property at the time of purchase is great peace of mind, there are good reasons why some homeowners should maintain a certain degree of vigilance regarding land contamination.  There are two primary reasons for this.

First, if your home is near an existing groundwater plume, but given current conditions, elapsed time, and cleanup efforts there is little reason to be concerned at present, there may be reason for concern in 5-10 years should that plume eventually extend to your property.

Second, if you live in proximate distances (one-half mile or less depending on the geology type) to industry, gas stations, dry cleaners, or other operations, there is potential for a release in the future. 

BKH:  What types of historical records does EDR aggregate?

JH:  There are a number of sources that EDR aggregates for the purposes of identifying the historical use on a property.  The American Society for Testing and Materials (ASTM) Standard requires that an EP goes back to 1940 or first developed use, whichever is earlier.  Principally, there are Sanborn Fire Insurance maps, reverse phone books listed by street, old aerial photographs, and historical topographic maps.

Collectively these sources have proven their worth in the Phase I industry for the past two decades.  EDR often packages the toxic site data with these historical sources into one offering to simply the EP’s work.

BKH:  How does residential due diligence vary from commercial due diligence?

JH:  That is another really important question, and one that we have been considering for quite some time.  So far, no agency, organisation, or other entity has taken the time to define appropriate care for residential properties. 

The short answer is we know it is not quite as extensive as what would be appropriate for commercial properties.  It is rare for “on-site” residential operations to lead to a release.  Most often, it is “off-site” releases that migrate on a property that are cause for concern with residential properties.

Last fall we developed a sixteen page document entitled “EDR Residential Property Screening Standard for Assessment of Potential Subsurface Environmental Contamination.” The title was deliberate in its intent to define land contamination and to illustrate the differences from environmental building issues such as mould, lead paint or asbestos.

BKH:  Are these reports affordable for the average consumer?

JH:  EDR offers two products, the NER and the NERplus.  The NER report is $40 and offers a simple search of spills within 1 mile of the home.  For consumers that want peace of mind and concise answers, the NERplus adds historical information and an EPs opinion for $295 which is less than the cost of most home inspections. 

BKH:  What is included in the NERplus package a consumer would purchase?

JH:  As I mentioned, the interpretation of the toxic site data cannot be done in a vacuum.  The geology, groundwater, and knowledge of regulatory clean-up must all be considered.  In addition, it is important to consider not just soil and groundwater contamination but also the potential for vapor intrusion.

Our NERplus is effectively a “Phase I for Residential Property.”  We partner with EPs all over the country that provide opinions on our data for banks.  We use this same EP network to provide the NERplus product. 

An important aspect of getting a quality report is having a knowledgeable local professional that understands area conditions of soil and groundwater and has done work in the area before.

The EP will look at the data and historical information and determine if there is the potential for soil contamination, groundwater contamination, or a potential vapor intrusion issue.  If they find cause for concern, they will suggest follow-up steps.  Typical turnaround time would be three business days.

BKH:  How many homes might be impacted by environmental contamination?

JH:  About 85% of homes will have some records of environmental contamination within one-half mile of the property.  That said, only a small portion of those instances will end up having a material impact on the property.

Based on the current numbers we are seeing, maybe 1 out of 100 or 200 homes will have reason for concern that will need to be addressed.  We would refer to these odds as “low occurrence but high severity” given the low probability yet great risk to health (and investment).

BKH:  What are the potential fixes?

JH:  The good news is that only a small portion of homes will have recommendations for a fix.  When they do, the fixes are relatively inexpensive for the most part.  As an example, here are three scenarios that might occur:

SCENARIO 1:  Surface soil is likely impacted due to manufacturing operations nearby.  The recommendation is to test the soil for levels of lead.  This costs approximately $150.  If levels are high, replace with new topsoil which costs approximately $2,000 depending on yard size.  This is especially important if one is a home vegetable gardener.

SCENARIO 2:  Groundwater is likely impacted due to a nearby release.  The recommendation is to test the water for certain contaminants (PCE, Benzene etc.) if there is a private well or irrigation well.  This costs approximately $150.  If contaminants are found, install a filtration system which cost approximately $2500.

SCENARIO 3:  Vapor intrusion is likely a cause for concern.  The recommendation is to call an Interior Air Quality (IAQ) professional to test the air.  This costs approximately $300.  If toxic vapors are found, install a “radon-esq” system to create negative pressure around living spaces and prevent vapors from entering the building,which costs approximately $2 per sq foot for building footprint.

These are going to be the most typical recommendations.  As you can see, in most cases there are very reasonable fixes.  These could even be put into a Purchase and Sale (P&S) Agreement.

BKH:  How do residential clients order your reports for their current home or a home they are looking to purchase?

JH:  Go to the EDR website to learn more about the NER products.  Residential clients simply enter their address and credit card information to order.   The NERplus information also includes risk explanations, a product definition, and work accomplishment descriptions.

Follow EDR on Twitter and  Facebook.

Just as a home inspector evaluates the physical structure, home owners are well served by having an environmental professional evaluate the land.  Evaluations protect family and a significant investment.  They ultimately provide knowledge and peace of mind.

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