This article highlights the use of first tuesday’s Residential Environmental Hazards Disclosure Booklet by a seller’s agent to provide environmental hazard and energy efficiency related information to all prospective buyers, and by a buyer’s agent to review with his buyer the consequences of any hazards disclosed as existing on the property.
Property conditions affecting desirability, as disclosed
In most circumstances, the existence of an environmental hazard has an adverse impact on the desirability and value of any property marketed for sale. Accordingly, seller’s agents are mandated to disclose environmental hazards on the listed property that are observed and known (or should have been known) to the seller or seller’s agent.
If they exist, environmental hazards are a material fact requiring upfront disclosure by the seller’s agent. After all, the facts might affect an interested buyer’s decision to submit an offer to purchase the property, and on what terms, such as who is to do what about the hazards.
Further, for a disclosure of facts affecting a property’s value to be meaningful, the buyer must receive them before his offer is prepared, submitted and accepted. Ultimately, property is purchased on conditions known and capable of disclosure upfront, not on disclosures delayed until the property is under contract.
The disclosure by a seller and the seller’s agent of their personal knowledge of existing environmental hazards on a one-to-four unit single family residence (SFR) is mandated on the sale, exchange or lease of all types of property.
Environmental hazards are disclosed by the seller and the seller’s agent in the Condition of Property Disclosure – Transfer Disclosure Statement (TDS) under the “Seller’s Information” category at Section C. As a further explanation, the Residential Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants reviews common environmental hazards which may exist on any property. [Calif. Civil Code §2079.7; see first tuesday Form 316-1]
The explanatory Residential Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants publication is not a disclosure of detrimental environmental conditions which actually exist on a property. Rather, the booklet contains general information on a variety of environmental hazards, none of which might physically exist on the subject property. The guide is voluntarily delivered to the buyer by the seller’s agent, but with no legal mandate to do so. [CC §2079.7(b); see first tuesday Form 316-1]
The Residential Environmental Hazards Guide is published by the California Environmental Protection Agency. The guide is designed to educate and inform buyers about potential environmental hazards which may be found on or about a residential property, such as:
- asbestos;
- carbon monoxide;
- formaldehyde;
- fuel and chemical storage tanks;
- hazardous waste,
- lead;
- mold; and
- radon. [Calif. Business and Professions Code §10084.1(a)(1)]
Included in the guide is a discussion about the significance of hazardous materials and conditions, and tips for identifying, locating and mitigating the hazards. Also discussed are the symptoms experienced by humans that result from the hazards. The Residential Environmental Hazards Guide was updated in 2011 to feature additional resources and publication lists for further study by the buyer. [Calif. Bus & P C §10084.1; see first tuesday Form 316-1]
Delivery with the TDS
The optional delivery of the Residential Environmental Hazards Guide is not to be confused with the mandatory delivery of a completed TDS on one-to-four unit SFRs. Good practice suggests the hazard guide is delivered with the TDS to those buyers expressing interest in buying a property. [See first tuesday Form 304]
The seller’s agent on the sale of a one-to-four unit SFR is obligated to personally conduct a visual inspection of the listed property for environmental hazards (as well as physical defects). This obligation remains even when a home inspection report is obtained or the seller is exempt from using a TDS form to disclose the hazards and defects known to them.
The seller’s agent’s findings on his inspection are documented on the TDS initially prepared by the seller, then timely delivered to the buyer upfront. Delivery of the TDS to prospective buyers advises them of the seller’s agent’s observations during his visual inspection of the property and any personal knowledge he may otherwise have about conditions on the property, as well as the seller’s, which constitute environmental hazards. [CC §2079; see first tuesday Form 304]
Further, the time for delivery of the mandatory TDS to a prospective SFR buyer is of critical importance for risk mitigation management by the seller and the seller’s agent. Delivery before an offer is accepted avoids demands on the seller and the seller’s broker for their elimination of the environmental (and physical) defects known to them, but not the buyer, at the moment the buyer’s offer is accepted.
As known to all, acceptance is the act which forms a binding contract between the seller and the buyer and is the moment that sets the buyer’s expectations about the property conditions. If the buyer knew everything about the property that the seller and his agent know, would he be buying this property at the price and on the terms offered? Ask yourself if your deals clear this hurdle of transparency in symmetry which is always applied by the courts.
Upfront delivery to prospective buyers, before an offer is submitted and a purchase agreement is entered into, conforms to the legislative intent regarding the timing for the mandatory disclosure of existing environmental hazards (and physical conditions) itemized in the TDS. [Attorney General Opinion 01-406 (August 24, 2001); CC §1103.3(a)(2)]
Since the Residential Environmental Hazards Guide discusses all environmental hazards which may potentially be present in or about the property, including existing hazards disclosed in the TDS, the Guide is functionally best delivered to prospective buyers with the TDS.
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Delivery of the booklet in conjunction with the TDS and its factual disclosures concludes the seller’s agent’s disclosure of environmental hazards and eliminates any further duty he has to advise the prospective buyer about the existence of environmental hazards. [CC §2079.8]
Thus, if a hazardous condition disclosed in the TDS is addressed in the booklet, the disclosure of the condition in the TDS together with the booklet covers the extent to which the seller’s agent must go to provide a full disclosure about the existence and nature of that hazardous condition. For the purposes of the seller’s side of the transaction, the agent and seller need to say nothing more to the buyer beyond timely providing him the TDS and the booklet to make the disclosures, unless the buyer inquires further which requires an honest and complete response.
While the timely disclosure of an environmental hazard is the obligation of the seller, it is the seller’s agent who has the agency duty of care and protection owed to his seller to see to it the seller is in compliance with the environmental hazard disclosure requirements.
The buyer’s agent’s review as his risk mitigation
If the seller or seller’s agent have not provided the buyer with the hazards booklet, the buyer’s agent may deliver it to the buyer himself, the preparation and delivery of the TDS being the exclusive domain of the seller, and in turn the seller’s agent.
While the seller’s agent is required to provide the buyer with the mandatory TDS, the seller’s agent has no duty to discuss the effect of the hazards with the buyer after the documents have been delivered, unless the buyer inquires.
On delivery of the TDS by the seller’s agent, it becomes the duty of the buyer’s agent to point out the hazards disclosed. He then reviews the booklet’s explanation of the disclosed hazards with the buyer, noting the consequences of the hazards and counseling the buyer on the alternatives available to mitigate the hazards should he make an offer to acquire the property.
Simply handing the buyer and booklet without directing attention to the specific contents of the booklet that directly relates to the hazard located on the subject property is insufficient: doing so is as feckless as merely handing the buyer the so-generic-as-to-be-useless Statewide Buyer and Seller Advisory published by the trade union.
Further, the buyer’s agent’s discussion about environmental hazards with the buyer provides the buyer with information necessary for setting the price and terms of any offer the buyer will make to acquire the property.
first tuesday’s Residential Environmental Hazards Disclosure Booklet for Buyers
first tuesday’s Residential Environmental Hazards Disclosure Booklet for Buyers contains numerous government consumer education publications, including:
- Section A: Residential Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants, discussed above;
- Section B: Protect Your Family From Lead in Your Home;
- Lead-Based Paint Disclosure – On Sale of Real Estate [See first tuesday Form 313];
- Section C: The Homeowner’s Guide to Earthquake Safety;
- Residential Earthquake Hazards Report [See first tuesday Form 315];
- Section D: Natural Hazard Disclosure Statement and Buyer Receipt of Hazards Booklet(s) [See first tuesday Forms 314 and 316]; and
- Section E: What is Your Home Energy Rating?
Timeline for delivery of booklet
Some of the publications in this booklet are required to be delivered to the buyer by the seller’s agent, depending on when the subject property was built. Below is a timeline of when publications must be delivered to buyers:
- January 1, 1960 – If the subject property was built prior to this date (December 31st 1959 and before), the seller’s agent must deliver a copy of The Homeowner’s Guide to Earthquake Safety to the buyer. [Calif. Government Code §8897.1]
- January 1, 1978 – If the property was built prior to this date (December 31st 1977 and before), the seller’s agent must deliver a copy of Protect Your Family From Lead in Your Home to the buyer. [40 Code of Federal Regulations §§745.101, 745.107(a)(1)];
- January 1, 1978 and any date after – If the property was built on this date or after, none of the publications contained in the booklet are mandated to be delivered.
Similarly, the Residential Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants and What is Your Home Energy Rating? are not mandated by law, regardless of when the property was constructed.
Lead contamination, at a glance
Protect Your Family From Lead in Your Home, located in first tuesday’s Residential Environmental Hazards Disclosure Booklet at Section B, is published by the U.S. Environmental Protection Agency. This portion of the booklet discusses how lead in the home can be identified and reviews methods to protect the occupants from lead poisoning.
Lead contamination frequently comes through the form of lead-based paint, defined as any surface coating containing at least 1.0 milligram per square centimeter of lead, or 0.5% lead by weight. Use of lead-based paint was banned by the Federal Consumer Product Safety Commission in 1978. [24 CFR §35.86; 40 CFR §745.103]
A lead-based paint hazard is any condition that causes exposure to lead from lead-contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects. [24 CFR §35.86; 40 CFR §745.103]
Occupants of a property can get lead in their body if they:
- inhale lead dust (which is most frequently exposed during renovations which disturb painted surfaces);
- put objects exposed to lead dust into their orifices; or
- ingest soil or paint chips that are contaminated with lead (which is of the most concern for children).
Lead-based paint maintained in a good condition poses little health risk. However, deteriorating lead-based paint which is cracked, damaged or chipped is hazardous and requires professional attention by a certified contractor.
Lead-based paint in areas which experience excessive wear and tear should be carefully monitored for damage. These areas include:
- doors;
- door frames;
- windows;
- window sills;
- stairs;
- railings;
- banisters; and
- porches.
Also reviewed in this publication is a discussion of what homeowners can personally do to protect themselves from lead, such as routine cleaning and frequently washing their hands, and how to permanently remove lead-based hazards by hiring a certified lead contractor.
The Protect Your Family From Lead in Your Home Guide must be delivered to buyers of residential property constructed before 1978. Delivery to buyers of property constructed after 1978 is not legally mandated, but advised as a matter of risk mitigation. [40 CFR §745.107(b)]
Similarly, a copy of the federal Lead-Based Paint Disclosure is required on all pre-1978 residential construction, included in Section B of the booklet. [See first tuesday Form 316-1 and 313]
Earthquake safety guide, at a glance
The Homeowner’s Guide to Earthquake Safety, Section C of the booklet, is published by the California Seismic Safety Commission. This guide analyzes the most frequently occurring structural weaknesses which may leave a home susceptible to damage on the occurrence of an earthquake — an inevitability in a state scarred by active fault lines. The guide also contains practical information concerning how earthquake-related weaknesses in a home can be safely corrected.
The Homeowner’s Guide to Earthquake Safety must be delivered by the seller’s agent to buyers of pre-1960 one-to-four unit residential properties, though delivery is not mandatory on homes built after this. However, the earthquake– preparedness information contained in the booklet is of tantamount relevance to all California homeowners and is useful to every buyer, regardless of when the property was built. [Gov C §8897.1]
Further, the seller and seller’s agent on all types of property must disclose through the Natural Hazard Disclosure Statement (NHD) any earthquake hazards known to them which affect the property. The NHD scheme encourages brokers and their agents to use natural hazard experts rather than gather the information from the local planning department themselves.
The use of an expert, who himself relies on the contents of the public record to prepare his report, relieves the seller’s agent of any liability for errors not known to the agent to exist.
Neither the seller nor any agent, be he the seller’s or the buyer’s agent, is liable for the erroneous preparation of an NHD they have delivered to the buyer, if:
- the NHD report and form is prepared by an expert in natural hazards, consistent with his professional licensing and expertise; and
- the seller and seller’s agent used ordinary care in selecting the expert and in their review of the expert’s report for any errors, inaccuracies and omissions of which they have actual knowledge. [CC §§1103.4(a), 1103.4(b)]
The need to prepare the seller’s NHD statement in advance of locating a prospective buyer must be anticipated by the seller and seller’s agent.
If the need is not anticipated, the NHD will not be prepared, signed and available for delivery to prospective buyers before an offer is accepted or a counteroffer is made, all requisites for delivery of the NHD as soon as possible. [CC §1103.3(a)(2)]
Further, delivery of The Homeowner’s Guide to Earthquake Safety in conjunction with the NHD to the buyer eliminates any duty of the seller or seller’s agent, but not of the buyer’s agent, to provide additional earthquake information. [See first tuesday Form 304 and 314; CC §2079.8]
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Home energy efficiency, at a glance
As utility costs are highly volatile and are an ongoing expense, an energy-efficient home is becoming increasingly important to forward-looking, budget-wise homebuyers. For perspective, approximately 33% of electricity use and 54% of gas use in California come from residential properties.
The literature, What is Your Home Energy Rating?, published by the California Energy Commission and updated in 2011, educates buyers of the statewide home energy rating system by providing tips for limiting energy usage and lowering homeowners’ energy bills – pertinent information in the increasingly “green” California.
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A property’s energy demands: an evolving factor in marketing
In California, newly constructed homes must be compliant with the latest Building Energy Efficiency Standards. However, homes built before the standards were established in 1978 may have insufficient energy efficiency measures in place which would decrease the owner’s ongoing operating costs, making this publication an indispensible tool for all homeowners, though particularly those who purchase older homes.
Similar to the Residential Environmental Hazards Guide, this portion of the booklet is voluntarily delivered to the buyer by the seller’s agent, but with no legal requirement to do so. Delivery of the booklet eliminates any duty of the seller or seller’s agent to provide further energy efficiency information to the buyer. [CC §2079.10]
Easy delivery – in print or by email
The first tuesday Residential Environmental Hazards Disclosure for Buyers combines all of the above government documents, and related first tuesday forms, into one single publication for easy delivery by hand, mail or email. [See first tuesday Form 316-1]
Though only some components of the booklet are mandated depending on when the subject property was built, it is prudent practice for the buyer’s agent to deliver the full booklet to his buyer.
Here, the buyer’s agent uses the narrative provided in the booklet to educate the buyer about the consequences of any hazards actually existing on the property as noted in the TDS. Thus informed, an offer can be prepared for a price and set of terms reflecting the buyer’s consideration of the disclosed defects.
Further, counseling about the effect on the value of the property the subject of hazards serves to mitigate the risk of claims from the buyer that the buyer’s agent failed to inform the buyer about the known consequences of the hazards disclosed by the seller and his agent.
The timely delivery of all booklets is confirmed in writing through a provision in the purchase agreement, or by having the buyer sign a Buyer Receipt of Hazard Booklet(s) form no later than the acceptance of his offer, though preferably before the offer has been submitted. [See first tuesday Form 150 §11.6 and 316]
Click here for a copy of first tuesday’s Residential Environmental Hazards Disclosure Booklet.
