Environmental Concerns Affecting Real Estate Transactions in Florida

Nov 9, 2021

Andrew Shell

Florida Real Estate Exam

Post last updated: Aug 26, 2022

Environmental Concerns Affecting Real Estate Transactions

· Understand the purpose and provisions of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

· Understand the provisions of the Superfund Amendment and Reauthorization Act (SARA)

· List the criteria for the innocent landowner defense

· Understand the purpose and use of the National Priority List

· Describe the information contained in a Phase I Environmental Assessment

· Describe the disclosure requirements for radon gas

· Know the provisions of the Residential Lead-Based Paint Hazard Reduction Act

· Understand the disclosure requirements for lead-based paint

· List exceptions to the Lead-Based Paint Hazard Reduction Act

COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT

A. Purpose and scope

Overview: In 1980, the Congress of the United States enacted the Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA. The purpose of this legislation is to provide the United States government and any participating states the authority to respond to the presence of hazardous substances properties which may pose a health risk. As part of the law, a National Priorities List (NPL) was established to identify contaminated sites. If a property is listed on the National Priorities List, it becomes eligible for “Superfund” funds to assist in the clean-up and waste removal.

Under CERCLA, a person who can be held responsible is known as a POTENTIALLY RESPONSIBLE PERSON. Liability for the presence of hazardous substances is broad and far-reaching, and the government does not need to show fault or prior knowledge of the substances present. A person who could be liable for the site’s clean-up is known as a Potentially Responsible Person, defined by CERLA as either:

The present owner of a site that is contaminated;
Former owners if the contamination occurred during their ownership period;
The manufacturer or producer of the hazardous substance, whether created on-site or transported to the site; or
Persons who transported the hazardous substance to the site.

B. Superfund Amendment and Reauthorization Act (SARA)

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) commonly known as Superfund, was enacted by Congress on December 11, 1980. The Superfund Amendments and Reauthorization Act (SARA) amended the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) on October 17, 1986. SARA reflected EPA’s experience in administering the complex Superfund program during its first six years and made several important changes and additions to the program.

SARA

Stressed the importance of permanent remedies and innovative treatment technologies in cleaning up hazardous waste sites.
Required Superfund actions to consider the standards and requirements found in other State and Federal environmental laws and regulations.
Provided new enforcement authorities and settlement tools.
Increased State involvement in every phase of the Superfund program.
Increased focus on human health problems posed by hazardous waste sites.
Encouraged greater citizen participation in making decisions on how sites should be cleaned up.
Increased the size of the trust fund to $8.5 billion.
SARA also required EPA to revise the Hazard Ranking System (HRS) to ensure that it accurately assessed the relative degree of risk to human health and the environment posed by uncontrolled hazardous waste sites that may be placed on the National Priorities List (NPL).

https://www.epa.gov/superfund

Finding Potentially Responsible Parties
EPA’s “Enforcement First” policy means that EPA will usually ask potentially responsible parties (PRPs) to conduct the investigation and cleanup before using Superfund money. EPA conducts a PRP search at each Superfund site to find the potentially responsible parties. EPA’s primary goal in conducting the PRP search is to identify all of the PRPs at a particular Superfund site. Potentially responsible parties conduct about 70% of all Superfund cleanups. EPA looks for evidence to determine liability by matching wastes found at the site with parties that may have contributed wastes to the site. EPA uses many approaches to do this research, including:

Reviewing documents
Site investigation
Interviews
Using “information request letters” to gather information
Title searches
EPA tries to identify all the potentially responsible parties (PRPs) at a site as soon as possible so that the PRPs can get involved early in the process. In addition to identifying potentially responsible parties, EPA tries to determine early on:

The nature of a party’s involvement (e.g., owner, generator);
A party’s potential defenses (e.g., 3rd party defense);
Any applicable exemptions or exclusions;
The amount of waste a party contributed; and
Whether the party can pay only very little or nothing at all toward the cleanup.
The Innocent Landowner Defense

To use the innocent landowner defense, the landowner must establish that he or she:

Conducted “all appropriate inquiry”;
Is in compliance with land-use restrictions and is not impeding the effectiveness or integrity of institutional controls;
Is taking “reasonable steps” to prevent continuing releases or threatened future releases;
Is providing cooperation, assistance, and access;
Is complying with information requests and administrative subpoenas; and
Is providing legally required notices.

The National Priorities List has sites listed for every state plus US territories. The List provides information on what has been done at the site and the projected date of completion of removal. The State of Florida sites is listed at Environmental Information for Florida The map below shows the location of the various sites, some more dangerous than others.

Environmental Due Diligence

Prior to purchasing a property, especially a commercial property or properties that are suspected of having environmental problems, a smart buyer will undertake certain preliminary steps to determine if a property is contaminated. Often, a mortgage lender will be concerned about a property’s environmental health and will require a borrower to take certain steps to determine if the property is contaminated in order to protect the bank’s investment in the event of foreclosure. ENVIRONMENTAL DUE DILIGENCE is the process in which a buyer attempts to discover the presence of hazardous substances.

Phase I Assessment

An investigation into a property’s prior use to determine the likelihood of hazardous substances being present. This phase also includes a general, on-site inspection of the property and improvements and a review of prior aerial photographs. In addition, the Phase I Assessment will review the National Priorities List, review government lists of underground storage tanks, determine if radon or asbestos is present, and review prior building records. A title search will also reveal past owners that may have participated in potential contamination as a result of their business activities.

Phase II Assessment

If Phase I yields indicators that suggest the hazardous substances may be present, then the Phase II Assessment is utilized. On-site field testing, analysis, and further inspections are performed in the continuing process to discover contaminants.

Phase III Assessment

A complex and detailed inspection of the site including core soil sampling and testing, water, and air analysis, and discussions of corrective actions to be taken if contaminants are discovered in Phase II.

Phase IV Assessment

Designation of parties or agencies to prevent and avoid possible future contamination.

Reducing Liability
Whether buying or selling real estate, there are several environmental issues that one needs to be aware of. Environmental problems with land or buildings can greatly reduce their value. Also, if a contaminated property is purchased, the buyer may be liable for clean-up costs even though he or she did not cause or contribute to the problem. Before making an offer on real estate, a potential buyer should ask the seller and any real estate professionals involved whether they are aware of environmental problems on the property. A seller may not be under any obligation to volunteer information about environmental problems but, if asked, he or she is required to answer truthfully. If the seller does not answer truthfully and a problem is found, he or she can be charged with fraud. If the answer is yes, the buyer should seek further information. Even if the answer is no, there may still be problems that the seller doesn’t happen to know about, so additional precautions should be taken.

To use the innocent landowner defense, the landowner must establish that he or she:

Environmental Hazards

ASBESTOS

A fire and heat resistant material used in insulation and roofing, asbestos is not automatically an environmental hazard if it exists in a structure. The problem is created if the asbestos is unsettled and its particles are floating in the air. If these particles are inhaled, asbestos can cause lung cancer or other respiratory problems. Owners of properties with asbestos should employ the services of an expert to inspect the asbestos on a regular basis to ensure that it is stable or to determine the proper procedure for removal.

RADON GAS

An odorless, colorless radioactive gas that, when ingested over a period of time, can cause cancer or other health problems. Dangerous radon can generally be found in airtight rooms such as basements or homes that are not occupied regularly.

Generally speaking, rooms that are ventilated or are open to breezes and the natural flow of air do not have a radon problem. Radon gas can be found in areas of the state where rock formations below the surface create this natural occurrence. Radon gas penetrates a structure through cracked foundations, slabs, or other permeable areas. Florida law requires that all sales contracts and leases for more than 90 days have a radon gas disclosure statement advising of the health risks associated with radon gas and that more information can be attained through the local health authorities.

Lead-Based Paint Hazard

Lead Exposure and What to Look For
If lead is suspected in a home:

Children should be tested for lead, even if they seem healthy.
Wash children’s hands, bottles, pacifiers, and toys often.
Make sure children eat healthy, low-fat foods.
Has the home checked for lead hazards?
Regularly clean floors, windows, and other surfaces.
Wipe soil off shoes before entering the house.
Talk to the landlord about fixing surfaces with peeling or chipping paint.
Take precautions to avoid exposure to lead dust when remodeling or renovating (call 1-800-424-LEAD for guidelines).
Don’t use a belt-sander, propane torch, dry scraper, or dry sandpaper on painted surfaces that may contain lead.
Don’t try to remove lead-based paint yourself.

Lead From Paint, Dust, and Soil Can Be Dangerous if Not Managed Properly

FACT: Lead exposure can harm young children and babies even before they are born
FACT: Even children that seem healthy can have high levels of lead in their bodies
FACT: People can get lead in their bodies by breathing or swallowing lead dust, or by eating soil or paint chips with lead in them
FACT: People have many options for reducing lead hazards. In most cases, lead-based paint that is in good condition is not a hazard
FACT: Removing lead-based paint improperly can increase the danger to a family

To protect families from exposure to lead from paint, dust, and soil, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X. Section 1018 of this law directed HUD and EPA to require the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.

The Lead-Based Paint Disclosure Rule (Section 1018 of the Residential Lead-Based Paint Hazard Reduction Act of 1992)
Before ratification of a contract for housing sale or lease, sellers and landlords must:

Give an EPA-approved information pamphlet on identifying and controlling lead-based paint hazards (“Protect Your Family From Lead in Your Home” pamphlet).
Disclose any known information concerning lead-based paint or lead-based paint hazards. The seller or landlord must also disclose information such as the location of the lead-based paint and/or lead-based paint hazards and the condition of the painted surfaces.
Provide any records and reports on lead-based paint and/or lead-based paint hazards that are available to the seller or landlord. (For multi-unit buildings, this requirement includes records and reports concerning common areas and other units and when such information was obtained as a result of a building-wide evaluation.)
Include an attachment to the contract or lease (or language inserted in the lease itself) which includes a Lead Warning Statement and confirms that the seller or landlord has complied with all notification requirements. This attachment is to be provided in the same language used in the rest of the contract. Sellers or landlords, and agents, as well as homebuyers or tenants, must sign and date the attachment.
Sellers must provide homebuyers a 10-day period to conduct a paint inspection or risk assessment for lead-based paint or lead-based paint hazards. Parties may mutually agree, in writing, to lengthen or shorten the time period for inspection. Homebuyers may waive this inspection opportunity.

The Lead-Based Paint Disclosure Rule
TYPE of HOUSING COVERED:
Most private housing, public housing, Federally owned housing, and housing receiving Federal assistance are affected by this rule.

EFFECTIVE DATES:
The regulations became effective on September 6, 1996, for transactions involving owners of more than 4 residential dwellings and on December 6, 1996, for transactions involving owners of 1 to 4 residential dwellings.

RECORDKEEPING:
Sellers and lessors must retain a copy of the disclosures for no less than three years from the date of sale or the date the leasing period begins. For help or additional information, call: 1-800-424-LEAD (5323).

Lead’s Effects
Lead can be harmful to adults as well as children. Adults can suffer from:

Difficulties during pregnancy
Other reproductive problems (in both men and women)
High blood pressure
Digestive problems
Nerve disorders
Memory and concentration problems
Muscle and joint pain

The Lead-Based Paint Disclosure Rule
The Lead-Based Paint Enforcement
Government Civil Penalties

With regard to civil enforcement actions, the Act authorizes EPA and HUD to assess an administrative civil penalty in the maximum amount of $10,000 for each violation. (For violations occurring after January 31, 1997, this amount has been adjusted to $11,000 per violation under the Civil Monetary Penalty Inflation Adjustment Rule.) Although the Act provides no authority for judicial civil penalties, it does authorize injunctive relief for violations of the Act.

HUD’S settlements have included $480,350 in penalties and commitments of $21 million to test and abate lead-based paint and lead-based paint hazards in 162,458 high-risk rental units. An additional $358,750 has been made available for funding projects such as purchasing portable blood testing devices; funding lead hazard abatement programs within high-risk cities; funding lead poisoning prevention programs at local health clinics; training; and funding educational lead paint programs.
Important
LANDLORDS will have to disclose known information on lead-based paint hazards before leases take effect. Leases will include a federal form about lead-based paint.
SELLERS will have to disclose known information on lead-based paint hazards before selling a house. Sales contracts will include a federal form about lead-based paint in the building. Buyers will have up to ten days to check for lead hazards.
RENOVATORS will have to give the pamphlet (“Protect Your Family from Lead in Your Home”) before starting work.

SUMMARY

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) is a federal law designed to provide the United States government and any participating states the authority to respond to the presence of hazardous substances properties that pose a health risk.

The Superfund Amendment and Reauthorization Act amended CERCLA by adding additional funding and the establishment of the Innocent Landowner Defense.

The criteria to utilize the Innocent Landowner Defense includes:
1. The owner was not aware of any contamination at the time of purchase.
2. Upon discovery of the contamination, the owner acted prudently.
3. Prior to purchasing, the owner exercised due diligence in an attempt to discover if the property was contaminated and inquired into any past uses of the property that might have led to contamination.

The National Priorities List identifies contaminated properties throughout the country. These identified properties are entitled to Superfund money for clean-up.

The Phase I Environmental Assessment contains a general, on-site inspection of the property, review of prior aerial photographs, review of the National Priorities List, review of government lists of underground storage tanks, determination if radon or asbestos is present, and review of prior building records.

Every Sale and Purchase Contract or lease for more than 90 days must contain a Radon Gas disclosure, warning potential buyers and renters of its danger.

Sellers must provide potential buyers of residential properties built prior to 1978 a disclosure concerning the presence of any lead-based paint and provide the opportunity to have the home inspected for lead-based paint. Pamphlets regarding lead-based paint must be provided to both potential buyers and renters.

Exceptions to the lead-based paint disclosure rules include non-residential property, foreclosure sales, housing for the handicapped or elderly, and short-term rentals of less than 101 days.

Vocabulary List

asbestos,CERCLA,environmental due diligence,environmental site assessment,innocent landowner defense,lead-based paint,national priorities list,phase I assessment,potentially responsible person (PRP),radon gas