Unit 20: Environmental Issues and the Real Estate Transaction

Friable

A dry, crumbling condition often used to describe old asbestos.

Under the North Carolina Leaking Petroleum Underground Storage Tank Cleanup Act, which of these is TRUE? A) Owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This is for both residential and commercial properties. B) Owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This is for commercial properties only. C) Owners of properties with tanks that may be leaking do not have any liability for cleanup for either residential or commercial properties. D) Owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This is for residential properties only.

A) Owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This is for both residential and commercial properties. According to the North Carolina Leaking Petroleum Underground Storage Tank Cleanup Act, owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This is for both residential and commercial properties.

T/F: Brokers are expected to have the technical expertise necessary to determine whether a hazardous substance is present.

False; Brokers are not expected to have the technical expertise necessary to determine whether a hazardous substance is present. However, they must be aware of environmental issues and take steps to ensure that the parties are protected.

T/F: Radon can be detected by its strong odor.

False; Radon is an odorless, colorless gas and cannot be detected by smell. However, some environmental hazards, such as formaldehyde and mold, can be detected because of their associated odors.

T/F: Owners of properties with tanks that may be leaking have no financial or legal responsibility for cleanup costs if they did not install the tanks or cause the leaks.

False; Under the North Carolina Leaking Petroleum Underground Storage Tank Clean Up, owners of properties with tanks that may be leaking do have financial or legal responsibility for cleanup costs even if they did not install the tanks or cause the leaks.

T/F: When a seller neglects to inform a broker about a known environmental problem, the real estate broker has no liability.

False; While brokers are not expected to have technical expertise regarding environmental problems, they should be able to recognize red flags. If the problem was visible or could have been discovered by the broker's due diligence, then the broker will have some liability for failure to disclose the problem.

Asbestos

Fire-resistant mineral fiber used in a variety of building supplies prior to 1978; when friable, can cause respiratory diseases and cancer. is a mineral that was once used in building supplies because of its fire-retardant and sound insulation qualities. It was a component of more than 3,000 types of building materials, including appliances, ceiling and floor tiles, exterior siding, and roofing. The Environmental Protection Agency (EPA) estimates that about 20% of the nation's commercial and public buildings contain asbestos.

Encapsulation

Sealing off environmental hazards instead of removal. the sealing off of disintegrating asbestos, is an alternate method of asbestos control that may be preferable to removal in certain circumstances. However, an owner must periodically monitor the condition of the encapsulated asbestos to make sure it is not disintegrating.

Radon

is a radioactive gas produced as a by-product of the natural decay of other radioactive substances. is clear, odorless and tasteless, it is impossible to detect without testing. Naturally occurs in all areas of the state from the decay of radioactive minerals in the ground.

underground storage tanks (USTs)

is a tank and any underground piping connected to the tank that has at least 10% of its combined volume underground.

landfill

is an enormous hole, either excavated for the purpose of waste disposal or left over from surface mining operations.

North Carolina Coastal Area Management Act (CAMA)

is designed to protect, preserve, and give management guidelines in coastal areas of the state. It places a severe limitation on developments in the coastal estuarine system. A majority of coastal areas in North Carolina, such as wetlands and marshes, have been declared areas of environmental concern.

Capping

is the process of laying two to four feet of soil over the top of the site and then planting grass or some other vegetation to enhance the landfill's aesthetic value and to prevent erosion.

An elevated level of lead in the human body causes

lead poisoning that can lead to serious damage to the brain, kidneys, nervous system, and red blood cells.

Joint and several liability

means that each of the individual owners is personally responsible for the total damages.

Retroactive liability

means that the liability is not limited to the current owner but includes people who have owned the site in the past.

Strict liability

means that the owner is responsible to the injured party without excuse.

water table

natural water level, whether it is above or below ground level. the natural level at which the ground is saturated. This may be near the surface in areas where the water table is very high or several hundred feet underground.

Real estate brokers need to be on the alert for potential groundwater contamination sources both on and off a property.

These include underground storage tanks, septic systems, holding ponds, dry wells, buried materials, and surface spills. Remember, because groundwater flows over wide areas, the source of contamination may not be nearby.

T/F: Brokers should be familiar with state and federal environmental laws and the regulatory agencies that enforce them.

True; Brokers should be familiar with state and federal environmental laws and the regulatory agencies that enforce them.

T/F: North Carolina brokers must disclose any known environmental hazards to consumers.

True; Environmental hazards are considered material fact that must be disclosed to consumers.

T/F: Liability under the Superfund extends to both the present and previous owners of contaminated sites.

True; Liability under the Superfund extends to both the present and previous owners of contaminated sites.

T/F: Brokers should be aware of possible environmental hazards and of where to seek help.

True; While brokers are not expected to have technical expertise regarding environmental problems, they should be able to recognize red flags and be able identify sources of information to address those problems.

Groundwater

Water under the surface of the earth. is the water that exists under the earth's surface within the tiny spaces or crevices in geological formations. Groundwater forms the water table.

The presence of radon over the EPA's recommended level of 4.0 picocuries is

a material fact that must be disclosed.

North Carolina Dredge and Fill Act

a property owner must obtain a permit from the Coastal Resources Commission before participating in any dredging or filling that may affect vegetation or aquatic conditions in North Carolina waters or marshlands.

Landfill

an enormous burial hole for various types of waste disposal.

wetlands

areas periodically inundated or saturated to the extent that they can or do support vegetation adapted to aquatic conditions.

For purposes of this disclosure, the EPA has defined target housing

as any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than 6 years of age resides or is expected to reside in such housing) or any zero-bedroom dwelling.

Carbon monoxide

colorless, odorless gas produced as a byproduct of inefficient burning of fuel; poor ventilation can lead to deadly concentration of gas.

In 1996, the EPA and the Department of Housing and Urban Development (HUD) issued final regulations requiring

disclosure of the presence of any known lead-based paint hazards to potential buyers or renters.

North Carolina Sediment Pollution Control Act

enacted to handle problems that occur as a result of sedimentation in state waters. Sedimentation may have natural causes, such as erosion, or human-made causes that result in a deposit of soil or other materials into water. Such deposits may have an adverse effect on the aquatic life in the area. Any type of development, construction, or any other activity that may disturb vegetation or topography in a way that may cause sedimentation is illegal and subject to the Act. The Act calls for erosion control devices, the development of sedimentation plans, and the creation of natural buffer zones. The law is enforced by the North Carolina Department of Environment, Natural Resources.

A number of asbestos products, including asbestos insulation, were banned in 1978. Today, we know that inhaling microscopic asbestos fibers may result

in a variety of respiratory diseases as well as lung and stomach cancer.

Under the North Carolina Lead-Based Paint Hazard Management Program

inspectors and firms/individuals who perform renovation, repair, and painting projects for compensation in homes and daycare facilities built before 1978 must be certified. Fines for violating this program can be $750 per day. Owner-occupied do-it-yourself renovations are not required to be done by certified firms or certified renovators.

Carbon monoxide (CO)

is a colorless, odorless gas that occurs as a by-product of burning such fuels as wood, oil, and natural gas if combustion is incomplete. Furnaces, water heaters, space heaters, fireplaces, and wood stoves all produce CO as a natural result of their combustion of fuel.

The criteria included the following for an innocent landowner immunity:

-The pollution was caused by a third party. -The property was acquired after the fact. -The landowner had no knowledge of the damage. -Due care was exercised when the property was purchased (the landowner made a reasonable search, called an environmental site assessment) to determine that no damage to the property existed. -Reasonable precautions were taken in the exercise of ownership rights.

Green Real Estate Company has a buyer agency agreement with Chris. Spencer is a real estate broker assisting Chris on behalf of his firm, Green Real Estate Company. Spencer is in process of discovering environmental hazards of a property that Chris may want to make an offer on. There are three main areas of discovery that Spencer needs to consider when advising Chris. Which of these is NOT one of the sources to consider? A) Question the owner. B) Brokers need to be able to conduct some tests themselves on behalf of the buyer. C) Recommend an environmental audit (environmental site assessment). D) Seek out an environmental impact statement (EIS), as required for federally funded projects and by the state or locality, if required.

B) Brokers need to be able to conduct some tests themselves on behalf of the buyer. Discovery of environmental hazards includes the following: (1) Recommend an environmental audit (environmental site assessment). (2) Question the owner. (3) Seek out an environmental impact statement (EIS), as required for federally funded projects and by the state or locality, if required.

George is excited to be moving from the beach to the mountains. He calls a local real estate firm that has been listing a lot of homes in his neighborhood. Joan, a real estate broker, is on phone duty at her firm when George calls in about wanting to list his home. Joan is new to the area and not very familiar with the environmental laws regarding coastal areas in North Carolina. When Joan lists George's house, what does she need to do to stay in compliance with North Carolina Real Estate Commission rules and licensing law in North Carolina? A) Joan needs to research any environmental laws that affect a property and does not need to disclose that information to all consumers regardless if they are clients or customers. B) Joan needs to research any environmental laws that affect a property and disclose that information to all consumers regardless if they are clients or customers. C) Joan does not need to research any environmental laws that affect a property and does not need to disclose that information to all consumers regardless if they are clients or customers. D) Joan does not need to research any environmental laws that affect a property and disclose that information to all consumers regardless if they are clients or customers.

B) Joan needs to research any environmental laws that affect a property and disclose that information to all consumers regardless if they are clients or customers. The real estate broker has a responsibility to help the consumer because brokers have a duty to discover and disclose material facts about the property, including environmental laws. In North Carolina, real estate brokers have a duty to discover and disclose material facts about the property itself, facts relating directly to the property, facts relating directly to the ability of the broker's principal to complete the transaction or anything of particular importance to the consumer. We owe these material facts to consumers regardless of whether they are a client or a customer.

Which of these is NOT an environmental hazard that requires disclosure? A) Mold B) Malodorous carpet C) Asbestos D) Radon

B) Malodorous carpet Environmental hazards that require disclosure include asbestos, radon, lead, formaldehyde, mold, hazardous waste, et cetera.

Comprehensive Environmental, Response, Compensation and Liability Act (CERCLA)

Created a fund (superfund) to clean up uncontrolled hazardous waste dies and to respond to spills.

The North Carolina Coastal Area Management Act (CAMA) is designed to protect, preserve, and give management guidelines in coastal areas of the state. It places a severe limitation on developments in the coastal estuarine system. Which of these is FALSE regarding CAMA? A) Real estate brokers in the eastern third of the state nearest the ocean should consider CAMA a fact of living in eastern North Carolina and have no duty to disclose because it is public knowledge. B) Any proposed development or changes in these areas, such as building, dredging, filling or digging, clearing or bulk-heading, must first be approved through a permit process. C) Property owners in violation of CAMA will face serious legal problems, including the probability of a court order mandating that they finance the repair of any damage done to the estuarine system. D) Real estate brokers in the eastern third of the state nearest the ocean should consider CAMA in compliance a material fact in transactions that might involve land development.

A) Real estate brokers in the eastern third of the state nearest the ocean should consider CAMA a fact of living in eastern North Carolina and have no duty to disclose because it is public knowledge. Real estate brokers in the eastern third of the state nearest the ocean should consider CAMA in compliance a material fact in transactions that might involve land development. Any proposed development or changes in these areas, such as building, dredging, filling or digging, clearing or bulk-heading, must first be approved through a permit process. Property owners in violation of CAMA will face serious legal problems, including the probability of a court order mandating that they finance the repair of any damage done to the estuarine system.

Which of the following describes the process of creating a landfill site? A) Waste and topsoil are layered in a pit, mounded up, and then covered with dirt and plants. B) Waste is buried in an underground concrete vault. C) Waste is compacted and sealed into a container and then placed in a tomb designed to last several thousand years. D) Waste is liquefied, treated, and pumped through pipes to tombs under the water table.

A) Waste and topsoil are layered in a pit, mounded up, and then covered with dirt and plants. A landfill is an enormous hole, either excavated for the purpose of waste disposal or left over from surface mining operations. The hole is lined with clay or a synthetic liner to prevent leakage of waste material into the water supply. A system of underground drainage pipes permits monitoring of leaks and leaching.

Radon is A) a radioactive odorless and colorless gas. B) not considered an issue unless discovered. C) harmless to adults. D) easily detected by its strong citrus smell.

A) a radioactive odorless and colorless gas. Radon is an odorless, colorless radioactive gas and must be disclosed if the seller knows of its presence.

Testing for the presence of lead-based paint A) is not required. B) often shows inconclusive results. C) must be paid for by sellers. D) is required in North Carolina.

A) is not required. The Lead-Based Paint Hazard Reduction Act of 1992 (LBPHRA) requires disclosure of known lead-based paint hazards to most potential buyers or renters by owners, landlords, and/or agents. Testing may be requested but is not required.

Each of these is true for a real estate broker and disclosure of environmental hazards EXCEPT A) real estate brokers do not have to disclose information regarding any environmental hazard because this is outside the area of expertise of the broker. B) a real estate broker representing the buyer knows there are building materials inside the home that contain asbestos; the broker discloses this information to the brokerage firm representing the seller. C) a real estate broker representing the buyer has access to radon test results and knows there are levels of radon inside the home that exceed federal guidelines; the broker discloses this information to the brokerage firm representing the seller. D) a real estate broker representing the seller knows there is lead-based paint in the home because the seller showed them a lead-based paint inspection report indicating there is lead-based paint in the home; the broker discloses this information to all potential buyers.

A) real estate brokers do not have to disclose information regarding any environmental hazard because this is outside the area of expertise of the broker. In North Carolina, real estate brokers have a duty to discover and disclose material facts about the property itself, facts relating directly to the property, facts relating directly to the ability of the broker's principal to complete the transaction or anything of particular importance to the consumer. We owe these material facts to consumers regardless of whether they are a client or a customer.

Sam, a real estate broker, affiliated with Best Homes Realty has listed a home for sale on 0.75 acre, 4 bedrooms, 3 baths, 2-story, and built in 1976. The kitchen and all the bathrooms are remodeled, and the house has fresh paint inside and out; the sellers also added a beautiful deck overlooking a wooded area. Of these disclosures, which one must the broker make sure the sellers give to a buyer? A) Radon in Your Home pamphlet B) Protect Your Family from Lead in Your Home pamphlet and the lead-based paint disclosure C) Wood-destroying insect certificate D) Working with Real Estate Agents Disclosure

B) Protect Your Family from Lead in Your Home pamphlet and the lead-based paint disclosure. The Protect Your Family from Lead in Your Home pamphlet pertains to residential housing built before 1978 because the Residential Lead-Based Paint Hazard Reduction Act banned lead-based paint for residential use in that year. At the time of listing, using the Exclusive Right to Sell Listing Agreement, Sam was required to obtain the signed lead-based paint disclosure from the seller.

Which of these is FALSE regarding potential and actual liability in a real estate transaction concerning environmental laws? A) Lenders may end up owning worthless assets if owners default on the loans rather than undertake expensive cleanup efforts. B) Sellers do not carry any legal exposure. C) Real estate brokers could be held liable for improper disclosure. D) Innocent landowners might be held responsible, even though they did not know about the presence of environmental hazards.

B) Sellers do not carry any legal exposure. Sellers often do carry the most legal exposure.

The North Carolina Coastal Area Management Act (CAMA) provides for all of the following EXCEPT A) protection of marshlands. B) the construction quality of beach housing. C) protection of coastal areas. D) the controlled development of coastal areas.

B) the construction quality of beach housing. CAMA provides regulations and mandates controlling coastal areas and marshlands. It does include standards or building codes for beach housing.

If a real estate broker does not discover and disclose information regarding environmental hazards and the exposure to the hazard causes a health problem to the buyer, which of these is FALSE? A) The real estate broker could be vulnerable to personal injury suit. B) The real estate broker could be violation of the REALTOR®Code of Ethics. C) The real estate broker has no liability. D) The real estate broker could be subject to disciplinary action by the North Carolina Real Estate Commission.

C) The real estate broker has no liability. In North Carolina, real estate brokers have a duty to discover and disclose material facts about the property itself, facts relating directly to the property, facts relating directly to the ability of the broker's principal to complete the transaction or anything of particular importance to the consumer. We owe these material facts to consumers regardless of whether they are a client or a customer. It is a violation of the REALTOR® Codes of Ethics as well and the buyer has the right to sue the broker.

The Mountain Ridge Protection Act was the first comprehensive law in the nation passed by a state to regulate construction on protected mountain ridges. Which of these is FALSE regarding this Act? A) The Act was adopted because of public outrage locally at what was perceived as a blight upon the scenic views of the mountains. B) The Act was adopted due to a 10-story condominium project built on a local mountain range. C) There is no such protection act anywhere in the United States. The government cannot regulate the mountains in that manner. D) The Act allows a municipality to adopt and enforce "any ordinance that regulates the construction of tall buildings or structures on protected mountain ridges."

C) There is no such protection act anywhere in the United States. The government cannot regulate the mountains in that manner. The Act was adopted due to a 10-story condominium project built on Little Sugar Mountain and because of public outrage locally at what was perceived as a blight upon the scenic views of the Blue Ridge Mountains. The Act allows a municipality to adopt and enforce "any ordinance that regulates the construction of tall buildings or structures on protected mountain ridges."

Carbon monoxide is NOT A) a result of incomplete combustion. B) a natural result of combustion. C) easy to detect without testing devices. D) quickly absorbed in the body.

C) easy to detect without testing devices. When improper ventilation or equipment malfunctions permit large quantities of CO to be released into a residence or commercial structure, it poses a significant health hazard. Its effects are compounded by the fact that CO is so difficult to detect.

Liability under the Superfund is A) limited to the current owner of record. B) joint and several, retroactive, but not strict. C) strict, joint and several, and retroactive. D) voluntary.

C) strict, joint and several, and retroactive. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was created in 1980. It established a fund of $9 billion, called the Superfund, to clean up uncontrolled hazardous waste sites and to respond to spills. A landowner is liable under CERCLA when a release or a threat of release of a hazardous substance has occurred on the landowner's property. Regardless of whether the contamination is the result of the landowner's actions or those of others, the owner can be held responsible for the cleanup.

Cadence, a real estate broker, is showing a commercial property to a potential buyer that has hired her firm to represent them. The buyer is new to commercial real estate investments and is looking to Cadence for her guidance through the commercial buying process. Which of these duties is Cadence NOT responsible for in representing the buyer? A) Asking the listing agent if there are any material facts that must be disclosed about the commercial property B) Investigating any federal environmental laws that could affect the property and disclose the information C) Investigating any state environmental laws that could affect the property and disclose the information D) Personally approving the buyer's financing for purchasing the commercial property

D) Personally approving the buyer's financing for purchasing the commercial property The real estate broker has a responsibility to help the consumer because they have a duty to discover and disclose material facts about the property including environmental laws. In North Carolina, real estate brokers have a duty to discover and disclose material facts about the property itself, facts relating directly to the property, facts relating directly to the ability of the broker's principal to complete the transaction or anything of particular importance to the consumer. We owe these material facts to consumers regardless of whether they are a client or a customer. We would not personally approve the buyer's financing, but we would ensure the buyer could qualify for the property they are making an offer on.

Who bears the obligation to disclose lead paint in residential properties built before 1978? A) Seller and all brokers B) Seller and listing broker C) Seller and lender D) Seller

D) Seller The seller or the landlord is the only one obligated to complete the disclosure. The real estate broker's obligation is to make sure all parties comply with the law.

Which of the following is NOT a requirement of the lead-based paint law? A) It is the seller's obligation to make sure the buyer receives the EPA book and disclosure, even if selling without a broker. B) Brokers are obligated to make sure all parties to the offer or contract are in compliance with the law. C) All parties—seller, buyer, and brokers—sign the disclosure. D) The buyer must complete an inspection to determine whether the property has lead-based paint.

D) The buyer must complete an inspection to determine whether the property has lead-based paint. No federal law requires that homeowners test for the presence of lead-based paint. However, known lead-based paint hazards must be disclosed.

When it comes to discovery of environmental hazards, a good first step for a real estate broker is to A) get all hazardous testing done right away before putting the home on the market; that way you will know for sure. B) not worry about it because all that information will come up in inspections during the due diligence period. C) not ask any questions of anyone because once a broker knows, the broker will be required to disclose that information. D) ask the owner, who may already be aware of a potentially hazardous condition.

D) ask the owner, who may already be aware of a potentially hazardous condition. Obviously, the first step for a broker is to ask the owner. The owner already may have conducted tests for carbon monoxide or radon. The owner also may be aware of a potentially hazardous condition. The environmental hazard can actually be turned into a marketing plus if the owner has already completed the detection and abatement work.

The seller has just learned that an industrial property, located a mile from the seller's home, might have environmental issues. In completing the property disclosure, the seller A) can ignore the environmental issue because it is not on the seller's property. B) must determine whether there has been any impact on the property before selling. C) may wait until more information is determined to disclose the issue. D) should disclose because the issue might impact the property and future values.

D) should disclose because the issue might impact the property and future values. Known environmental issues must be disclosed.

Lead poisoning

Elevated levels in the human body that can lead to serious damage to the brain, kidneys, nervous system, and red blood cells.

innocent landowner immunity

It was recognized that in certain cases, a landowner in the chain of ownership was completely innocent of all wrongdoing and therefore should not be held liable. The innocent landowner immunity clause established the criteria by which to judge whether a person or business could be exempted from liability.

Electromagnetic fields (EMFs)

Naturally occurring energy fields near power lines and electrical appliances. are generated by the movement of electrical currents. The use of any electrical appliance creates a small field of electromagnetic radiation: clock radios, blow dryers, televisions, and computers all produce EMFs. The major concern regarding electromagnetic fields involves high-tension power lines.

Under the Residential Lead-Based Paint Hazard Reduction Act

persons selling or leasing residential housing constructed before 1978 must disclose the presence of known lead-based paint and provide purchasers or lessees with any relevant records or reports. A lead-based paint disclosure statement must be attached to all sales contracts and leases regarding residential properties built before 1978, and a lead hazard informational pamphlet must be distributed to prospective buyers and tenants.

The purpose of the North Carolina Leaking Petroleum Underground Storage Tank Cleanup Act is to

regulate underground storage tanks' discharge of any hazardous substance, including gas and oil. Owners of properties with tanks that may be leaking face the heavy financial burden of cleanup costs, even though they themselves did not install the tanks or cause the leak. This Act covers both residential and commercial properties.

An asbestos report is now

required in North Carolina before a permit will be issued for the reconstruction, renovation, or demolition of any residential or commercial structure. Either of these approaches can satisfy the concerns of a consumer. Appraisers also should be aware of the possible presence of asbestos.

Asbestos is highly friable

that is, as it ages, asbestos fibers break down easily into tiny filaments and particles. When these particles become airborne, they pose a health risk to humans.

CERCLA is administered and enforced by

the EPA

Pollution and hazardous substances in the environment are of interest to real estate brokers because

they affect the attractiveness, desirability, and market value of cities, neighborhoods, and backyards

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

was created in 1980. It established a fund of $9 billion, called the Superfund, to clean up uncontrolled hazardous waste sites and to respond to spills. It created a process for identifying potentially responsible parties (PRPs) and ordered them to take responsibility for the cleanup action.

Urea-formaldehyde (UFFI)

was first used in building materials, particularly insulation, in the 1970s. Gases leak out of the urea-formaldehyde foam insulation (UFFI), as it hardens, and they become trapped in the interior of a building.