Environmental hazards can arise in almost any type of real estate transaction — residential, farm or commercial. How to identify potential environmental concerns and address them will allow parties to overcome the nemesis to keep deals moving toward successful closings.

Orchards and pesticides: lead and arsenic contamination 

What should a buyer consider when buying property that was formerly used or is currently used as an orchard? 

In the past, certain pesticides used in fruit orchards contained lead and arsenic. Although soils naturally contain traces of these compounds, the application of pesticides for agricultural purposes has resulted in some soils containing contamination that could result in health risks. Soil sampling information is available in the DATCP publications “Lead Arsenate Soil Sampling Guidance for Homeowners” at datcp.wi.gov/Documents/ArmPub219.pdf and “Lead and Arsenic in Soil at Old Fruit Orchards Frequently Asked Questions” at datcp.wi.gov/Documents/ArmPub99.pdf. These publications provide general information for homeowners and homebuyers. The WRA created the Lead/Arsenic Pesticide Addendum to assist buyers and sellers when negotiating a transaction with former or current orchards. The addendum is available in zipForm. 

Mold 

A buyer hired a home inspector who found signs of mildew as well as condensation in the attic. The inspector wrote as a recommendation/observation under the “repairs” section of the report: “Signs of mildew were observed in the attic. I recommend that a mold test be done and that the water damage and mold damage be remediated by a licensed contractor.” A mold test was not included as part of the offer. How should the buyer proceed? 

The WB-11 Residential Offer to Purchase defines a “test” as “the taking of samples of materials such as soils, water, air or building materials from the Property and the laboratory or other analysis of these materials.” A mold test would not be permitted under the standard inspection contingency. Perhaps the best procedure to follow if the buyer wants mold testing would be to draft an amendment that would allow the mold test.

The buyer, however, also should be made aware that the Centers for Disease Control and Prevention (CDC), the Environmental Protection Agency (EPA), State of Wisconsin Division of Public Health (DPH) and other experts across the country recommend against spending time and money for testing. There are no EPA standards or other authoritative information regarding what constitutes an unsafe level of mold. Consequently, different “experts” and contractors may take samples using different testing methods, interpret data differently and recommend different measures to address the problem. Most authorities recommend a thorough inspection to determine the cause of any mold growth rather than testing. Prompt elimination of the moisture source, removal of the mold and a thorough cleaning often are more useful responses, regardless of mold species or concentration.

See pages 16-19 of the November 2009 Legal Update, “WB-11 Residential Offer to Purchase – 2011 Edition” at www.wra.org/LU0911 regarding inspections and testing. For more information, including general information about mold, discussion of contingency language and lists of contractors, see Legal Update 02.06, “Managing Mold Issues in a Real Estate Transaction” at www.wra.org/LU0206 and the resources on the WRA’s mold resource page at www.wra.org/mold. 

Asbestos/vermiculite 

The home inspector indicated that the insulation in the attic appeared to be vermiculite and told the buyer that the EPA website states that if there is vermiculite insulation in a home, it should be assumed to contain asbestos. The buyer requested the seller pay for the insulation to be tested and, if found to contain asbestos, that the seller pay to remove the asbestos. What is the seller’s legal obligation? If this deal falls through, what, if anything, is the seller obligated to disclose?

Asbestos cannot be identified simply by looking at it unless it is labeled, so the only way to know for sure is to get a sample analyzed. Generally, only asbestos material that is damaged or will be disturbed needs be tested. Undisturbed asbestos that is in good condition typically will not release asbestos fibers and may best be handled by leaving it alone. Problems with friable or damaged asbestos may be treated by either repair or removal. Repair usually consists of sealing or covering the asbestos-containing material.

However, since 2009 per Wisconsin law, vermiculite insulation is assumed to be asbestos-containing material unless proven otherwise in accordance with the EPA-recommended sampling and analysis protocols specific to vermiculite insulation. At this time, the EPA has not published any official guidance for sampling and testing vermiculite insulation. Therefore, vermiculite insulation must be treated as asbestos-containing material. This may necessitate the use of certified asbestos workers for any projects disturbing or impacting the insulation. 

Given the apparent presence of insulation containing vermiculite, the seller may amend the Real Estate Condition Report for subsequent transactions to include the information the seller now knows from the home inspection report. If the seller does not disclose this to buyers, that task may fall to the real estate licensee.

Information about the asbestos rules and certification requirements for asbestos workers is found at www.dhs.wisconsin.gov/asbestos. For more information regarding asbestos, see the DHS Wisconsin asbestos page at dhs.wisconsin.gov/asbestos/index.htm, the EPA asbestos information at www.epa.gov/asbestos, the August 2009 Legal Update, “Environmental Concerns 2009,” at www.wra.org/LU0908 and Wis. Admin. Code Chap. DHS 159 — repealed and recreated effective May 1, 2009 — at docs.legis.wisconsin.gov/code/admin_code/dhs/110/159.pdf. 

Former gas station 

The broker is in the process of writing an offer on a property that was a gas station years ago. The seller said the gas storage tanks had been dug up and properly recorded. The potential buyer did some checking with different agencies and could find no records. How can the broker proceed to protect the potential buyer and the broker from any liability regarding potential gasoline tanks that were previously, or still are, buried? 

Given the potential cost and risks associated with environmental contamination, the buyer may consider consulting with an attorney who specializes in real estate and environmental law issues before submitting an offer on a property formerly used as a gas station. Generally an owner of property is liable for the cleanup of hazardous substances and environmental contamination. Therefore, a buyer considering the purchase of property formerly used as a gas station should take care to avoid taking on potential liability for any existing known or unknown contamination. 

The buyer may engage in some investigation with the Department of Agriculture, Trade and Consumer Protection — see the resources at datcp.wi.gov/Consumer/Hazardous_Materials_Storage_Tanks/index.aspx, or possibly the Department of Natural Resources or the EPA, but if the buyer is unable to find information about the removal of tanks or other information regarding the property, the buyer may draft contingencies for the seller to provide such information and documentation. In addition, prior to drafting, the buyer may also consult with the potential lender to determine what, if any, specific information the lender will require to fund the transaction. 

When considering the purchase of property that may have environmental contamination, the buyer may request an environmental site assessment known as a Phase I Environmental Site Assessment and/or a Phase II Environmental Site Assessment of the property. A Phase I report includes information about the potential or known documented contamination. Note, however, the Phase I assessment is a document search only and does not include any testing or sampling of soil, ground water or buildings. The Phase II assessment is a more detailed investigation that can include testing for hazardous substances. What assessments may be appropriate would be a question for the attorney working with the buyer and for specialists in environmental law. The buyer’s attorney may recommend appropriate contingencies to minimize the buyer’s risk if the property is contaminated based on its former uses. 

A helpful Wisconsin Real Estate Magazine article, “Finding Property Contamination Before it Finds You,” is available at www.wra.org/WREM/Sept09/Contamination, including links to DNR resources. See also the Environmental Evaluation Contingency in the WB-15 Commercial Offer to Purchase and the discussion thereof on pages 18-19 of the March 2012 Legal Update, “2012 WB-15 Commercial Offer to Purchase,” at www.wra.org/LU1203.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.