Environmental Issues

Transcription

1 Environmental Issues Learning Goals: List and define environmental hazards an agent should be aware of to protect a client s interests. Identify warning signs, characteristics, causes, and solutions for the various environmental hazards most commonly found in real estate transactions. Explain the potential hazard of underground storage tanks. Describe how real estate professionals may be able to prevent liability under environmental law. Environmental Issues There is a need to balance commercial use of land with preservation of vital resources and protection of the quality of water and soil. Prevention and cleanup of pollutants and toxic wastes revitalize land and add greater opportunity for responsible development. Environmental issues are important in the practice of real estate Licensees must be alert to existence of environmental hazards and must make property disclosures. Even though it is not the responsibility of the licensee to discover problems, it is the licensee s responsibility to ask questions and must make sure the prospective purchasers get information about hazards so they can make informed decisions. ABC Real Estate School 3 st ed National Workbook August 2010 Page 365

2 Hazardous Substances Asbestos Once used as insulation; banned in 1978 About 20 percent of the nation s commercial and public buildings contaminated. Health hazard o Inhaling can result in respiratory diseases o Harmful only when disturbed or exposed o Highly friable (breaks down easily into tiny filaments and particles) o No safe level of asbestos exposure Used also in residential properties o To cover pipes, ducts o Fire resistant property made it popular Costly to remove o Requires state licensed technicians and specially sealed environments o Disposal at licensed facilities o Encapsulation, or sealing off of disintegrating asbestos, may be preferable method of containment. Lead-based paint and other lead hazards Lead was used as pigment and drying agent in paint. Present in about 75% of private housing built before Elevated levels in body cause serious damage to brain, kidneys, nervous system and red blood cells; children most vulnerable Lead particles can be present anywhere in soil and ground water Use of lead-based paint banned in 1978 No federal regulations that homeowners test for presence of lead-based paint. EPA and HUD regulations require disclosure of any known lead-based paint hazards to potential buyers and renters. Must attach form to all residential leases and sales contracts along with hazard pamphlet. Radon Gas created by natural decay of other radioactive substances. Hazardous when trapped in buildings in high concentration. Colorless/tasteless impossible to detect without testing. Levels of radon can be reduced by installing ventilation systems or exhaust fans. Home radon-detection kits available. Most accurate testing by radon detection professionals. ABC Real Estate School 3 st ed National Workbook August 2010 Page 366

3 Formaldehyde Chemical primarily used in insulation. Also found in some glues, resins, pressed wood, etc. HUD has regulated use in plywood and particleboard since 1985 Listed as hazardous air pollutant in Causes several health problems. Tests can be conducted to determine presence of or level of formaldehyde gas in home. State may require disclosure. Carbon monoxide Colorless, odorless gas byproduct of burning fuels due to incomplete combustion. Improper ventilation of heating equipment, malfunction creates problems. Detectors are available, mandatory in some areas. Polychlorinated biphenyls (PCBs) Were often used as insulating material in dielectric oil. May be present in electrical equipment such as transformers and fluorescent light ballasts. Linger in environment a long time and are suspected of causing health problems Manufacture and commercial distribution of PCBs banned in Hazardous if present in leaking containers stored on a site C hlorofluorocarbons (CFCs) 1. Nontoxic, nonflammable chemicals that deplete the ozone layer of the earth 2. Manufacture mostly ended in Homes may have products, especially air conditioners and refrigerators that contain CFCs. Consumers should be aware of disposal issues. Mold Can grow on almost any organic substance if moisture and oxygen are present Gradually destroys what it is growing on and also causes serious health problems. Triggers allergic reactions and asthma attacks. Also produces potent toxins and irritants. Construction practices that result in tightly sealed buildings may prevent adequate ventilation and promote mold. Other causes are roof leaks, unvented combustion appliances, and outside water being directed into building by gutters or landscaping. EPA has published guidelines for remediation or clean-up. Number and size of lawsuits growing Electromagnetic Fields Produced by electric currents Controversy over claims whether they cause health problems. Major concern is high- to purchase property near power tension power lines over property. Buyers reluctant lines/transmitters ABC Real Estate School 3 st ed National Workbook August 2010 Page 367

4 Groundwater Contamination Contamination of underground water threatens supply of pure clean water for private wells or public water supplies. o Contamination comes from run off from waste disposal sites, leaking underground storage tanks, use of pesticides and herbicides. o Contamination can spread far from source. o Numerous state and federal regulations exist. Waste Disposal Sit es A. Landfill used as disposal site for garbage. 1. Clay or synthetic liner used to prevent leakage into water supply; layering process used until full. 2. Capping by laying 2-4 feet soil of over top and planting grass or other vegetation. 3. Ventilating with pipe through cap to release accumulation of natural gas. B. Federal, state, and local regulations govern location, construction, content, and maintenance of landfill sites C. In Practice: location close to garbage incinerator and waste disposal site lowers market value of homes. D. Hazardous and radioactive waste disposal sites subject to strict regulation to prevent escape of toxic substances; usually limited to remote locations. Underground Storage Tanks A. Three to five million underground storage tanks (USTs) in the United States; EPA says about 40 percent are leaking 1. Commonly found a. Where petroleum products used or gas stations/auto repair shops located b. Commercial/industrial establishment c. Printing/chemical plans d. Wood treatment, paper mills e. Paint manufacturers f. Dry cleaners g. Food processing plants h. Chemical storage or process waste plants i. Military bases and airports j. Residential heating oil tanks 2. Some are currently in use but others are abandoned. Once common to bury toxic waste 3. Clean-up can be expensive ABC Real Estate School 3 st ed National Workbook August 2010 Page 368

5 Lead Based Paint When a transaction involves a property built before 1978, the purchaser must be provided with a lead based paint disclosure. Usually this is provided by the hired Title Company during the escrow period. The licensee is not required to be an expert in this area, but the licensee should verify that the purchaser receives this information and if asked should recommend that the purchaser hire a licensed inspector. The licensee if asked, should also provide the purchaser with contact information for government agencies such as the Environmental Protection Agency (EPA) and Housing and Urban Development (HUD), so he/she can learn additional information about this potential hazard. Health effects of lead Childhood lead poisoning remains a major environmental health problem in the United States. People can get lead in their body if they: Put their hands or other objects covered with lead dust in their mouths. Eat paint chips or soil that contains lead. Breathe in lead dust, especially during renovations that disturb painted surfaces. Lead is more dangerous to children because: Babies and young children often put their hands and other objects in their mouths. These objects can have lead dust on them. Children's growing bodies absorb more lead. Children's brains and nervous systems are more sensitive to the damaging effects of lead. If not detected early, children with high levels of lead in their bodies can suffer from: Damage to the brain and nervous system Behavior and learning problems, such as hyperactivity Slowed growth Hearing problems Headaches Lead is also harmful to adults. Adults can suffer from: Reproductive problems (in both men and women) High blood pressure and hypertension Nerve disorders Memory and concentration problems Muscle and joint pain Beginni ng April 22, 2010, federal law requires that contractors performing renovation, repair and painting projects that disturb more than six square feet of paint in homes, child care facilities, and schools built before 1978 must be certified and trained to follow specific work practices to prevent lead contamination. Where lead is found The older the home, the more likely it has lead-based paint. Many homes built before 1978 have lead-based paint. The federal government banned lead-based paint from housing in Some states stopped its use even earlier. Soil can pick up lead from exterior paint, or other sources such as past use of lead ed gas in cars, and children playing in yards can ingest or inhale lead dust. Lead dust can form when lead-based paint is dry scraped, dry sanded, or heated. Dust also forms when painted surfaces bump or rub together. Lead chips and dust can get on surfaces and objects that people touch. Settled lead dust can re-enter the air when people vacuum, sweep or walk through it. Lead in soil can be a hazard when children play in bare soil or when people bring soil into the house on their shoes. ABC Real Estate School 3 st ed National Workbook August 2010 Page 369

6 ABC Real Estate School 3 st ed National Workbook August 2010 Page 370

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8 Chapter 9 Financing Learning Goals: Define title theory, lien theory, and intermediate theory and identify which best describes your state's laws. Define hypothecation and describe how it relates to the collateral for a loan. Compare and contrast a mortgage with a deed of trust. List and describe the provisions of a note and the requirements for a negotiable instrument. Define interest and differentiate between interest in arrears and interest in advance. Define usury. Explain discount points. Describe the reasons for prepayment clauses/prepayment penalties. Describe the various provisions found in a mortgage or a deed of trust, including those relating to default, assignment, release, foreclosure, redemption, and deficiency. Explain recording a mortgage or a deed of trust as it affects priority of liens. Explain the provisions of a land contract as a financing document and contrast it with a mortgage or a deed of trust. Relate the procedures involved in a foreclosure. ABC Real Estate School 3 st ed National Workbook August 2010 Page 372

9 Terminology Related to Real Estate Financing Note A promissory note is a financing instrument, also just called a note. A note is a negotiable instrument, evidence of the promise to repay the debt. The note usually states the terms of the core obligation, and serves as proof of the debt. Promissory note or note is defined as a contract 69 detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee). Mortgage Loan Instrument The mortgage loan instrument secures financing for the note. There are two major types of mortgage loan security instruments 1) a mortgage and 2) a deed of trust. There are minor differences between a mortgage and a deed of trust. A mortgage is a two party instrument between the lender and the borrower. A deed of trust is a three party instrument that involves a trustee (usually a title company) that facilitates or oversees the instrument. Mortgage is defined as a legal document used to secure the performance of a financial 70 obligation. It is a two-party instrument, consisting of a mortgagor (borrower) and a mortgagee (lender). Deed of trust is also used to secure the performance of an obligation, but is a 3 party document that grants a trustee power to carry out the transaction. The parties consist of a trustor (borrower), a beneficiary (lender) and a trustee (usually a title company). Title A title is the evidence that an owner has that they hold the legal right to possess something. Lien A lien is defined as a charge or claim that one person has on the property of another as security for a debt. A lien is a type of encumbrance, but an encumbrance isn t always a lien. Hypothecation Used in home ownership. It is pledging property as security for payment of a loan without surrendering possession of the property August 10, Reilly, John W. The Language of Real Estate 5 th ed. Chicago: Dearborn Financial Publishing, ABC Real Estate School 3 st ed National Workbook August 2010 Page 373

10 Encumbrance An encumbrance is a claim, lien, charge or liability affixed to real property. It is a right or interest held by someone other than the owner of the property that affects title to real estate. It may be a restriction or condition of use, a utility company s right to use a piece of property (easement), a mortgage, a debt for unpaid taxes or construction costs. A blanket encumbrance or blanket loan covers more than one parcel, lot, or unit. It is a type of financing used to finance multiple lots or units. When a developer owns more than one parcel of land, it is important for the developer to be able to sell one individual parcel/unit without affecting the mortgage on the entire project. This would be allowed by ensuring that the mortgage covering the project includes a partial release clause. This clause permits the developer to release a particular mortgage, insuring that the encumbrance/loan will continue to cover all other unreleased units or lots. Escrow Escrow is defined as the process by which money and/or documents are held by a disinterested third party until satisfaction of the contract terms and conditions have been completed. Conveyed Convey means to transfer ownership or title. Usury Laws Laws that control the amount or rate that can be charged to borrowers when securing a loan. Hypothecation The act of pledging property as security for payment of a loan without surrendering possession of the property. Equity Equity is defined as property value minus debt owed. Collateral Collateral is defined as something of value pledged as security for a debt. The collateral for a real estate mortgage loan is the property itself. Deed Deed is defined as 71 a written instrument that, when executed and delivered, conveys title to or an interest in real estate. U sury Laws State laws that control the amount of interest that can be charged on a debt. If the state (Nevada) offers pay-day loans, often the state does not have usury laws in place. 71 Galaty, Allaway, and Kyle. Modern Real Estate Practice, 17 th ed. Chicago: Dearborn Financial Publishing, Inc, ABC Real Estate School 3 st ed National Workbook August 2010 Page 374

11 Equity: Equity is defined as the difference between the amount of money owed and the value of the property. If a property appreciates in value, and the amount of debt stays the same, the owner s equity in the property increases. If the property depreciates or decreases in value and their amount of debt or loan amount stays the same, the owner s equity in the property decreases. If a buyer purchases a property with zero down and the property depreciates in value, the owner can become upside down, in other words they owe more on the loan than the property is worth, and they have zero or even negative equity in the property. What is equity? Property value Sales price + appreciation - debt owed - existing mortgage amt = Equity = Equity ABC Real Estate School 3 st ed National Workbook August 2010 Page 375