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A look at the top enviro-issues facing real estate

June 1, 2008

By Michael Thiel

Green is the “in” color this year as just about everyone incorporates the idea of eco-friendliness into their businesses. For example, in trademark filings with the federal government, the number of applications for new trademarks that included the color green more than doubled between 2006 and 2007. It’s no different in the real estate business. As consumers become more aware of environmental issues and their impact, associations need to provide members with the information to manage risk from environmental issues in the real estate transaction.

Here’s a look at the top environmental issues affecting real estate practitioners and some effective risk management techniques.

Lead Leads the Pack
At the top of the list are lead hazards. The dangers of lead in the environment and the damage it can cause, particularly to children, is well documented. A prime source is old lead-based paint, but lead can also be found elsewhere on properties, including the soil. A comprehensive federal statutory disclosure requirement (affecting all properties built prior to 1978) that includes both information and disclosure forms provides licensees with a means of managing their risk from lead-based paint liability. It is imperative, though, to complete all of the required steps and to obtain all required acknowledgments.

Failure to observe the requirements of the statute and its regulations can have two immediate impacts, both of which can be detrimental to the broker and licensee. First, there is potential liability if occupants of those properties who are injured as a result of accidental exposure to lead paint or dust file a lawsuit. Second, even if no one is injured as a result of lead exposure, noncompliance with the regulations means heavy fines—a single transaction involving a piece of property covered under this law has the potential to impose more than $50,000 in fines. Brokers must always be prepared to provide documentation that demonstrates their compliance with the requirements for each transaction involving affected housing.

Mold is Still an Issue
Mold, particularly what is called “toxic mold,” was the topic of the day five years ago and the source of growing concern over liability for the real estate industry. A crucial element in the planet’s own recycling process, mold plays a role in breaking down organic materials, including those used in buildings. Mold wasn’t new five years ago and it certainly isn’t new today, even if it has dropped out of the headlines. Although the hysteria associated with mold has largely subsided, licensees must maintain awareness of this as an issue.

Mold is almost always a result of unintended moisture intrusion or accumulation in a building. Although this moisture can lead to visible mold accumulation, which should always be disclosed to prospective purchasers, many times the mold will be hidden behind the surface. As a result, evidence or disclosure of water damage (ceiling, basement, or elsewhere) should always be considered with an eye toward mold.

Property-condition disclosure forms required in many states address the issue of water intrusion. Other information pieces on mold and mold remediation are available at the REALTOR.org store or online at the EPA Web site, epa.gov.

RADON An Invisible Threat
Radon is another naturally occurring danger that can affect properties. Suspected to be the second leading cause of lung cancer in the United States, radon is a naturally occurring gas that can accumulate to unacceptable levels in buildings and homes, particularly in the lower level. The HUD form that educates FHA buyers about home inspections includes language recommending that every home be inspected for radon. Although geography and geology play a role in the probability of radon occurrence, all licensees should be aware of the issue.

As there are no visible indicators of radon, the real estate professional’s role is to understand the issue and refer buyers and sellers to reliable sources of information. Resources about radon and radon testing can be found at the EPA Web site. Making members aware of these free resources can help them provide services to buyers and sellers.

Although no one expects real estate agents to be environmental experts, they should be able to identify and provide appropriate information to the people with whom they work. Here the important point is not to have all the answers, but rather to know where to get them.