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Toxic Waste Sites: Peril of Liability : Appeal Court Holds Realtors Responsible for Risk Disclosure

Second in a series concentrating on hazardous wastes as they relate to real estate. NEXT: The question of disposal and/or treatment of hazardous wastes.

November 10, 1985|RUTH RYON | Times Staff Writer

It was a bright, sunny day this fall in downtown Los Angeles when a contractor unearthed something that could have resulted in immediate death and destruction.

Luckily, it didn't, but it became part of the hazardous-waste liability cloud hovering over real estate.

It was a 10,000-gallon tank filled with gasoline.

Frank Goss cringed. "If the forks of the forklift had punctured the tank, the gasoline in it could have exploded like a bomb."

Goss is president of Building System Evaluation Inc., a consulting firm, of Sierra Madre. The tank had been buried on a site owned by one of his clients.

The contractor was grading the site for construction of a storage facility when he discovered the tank, which he picked up with the forklift and set aside.

"The fact that the guy is alive today is a miracle," Goss said, "and in that crowded metropolitan area?" He grimaced.

Other construction workers stuffed dry ice through the fuel port of the tank to lower the temperature of the gasoline and minimize the explosiveness of the vapor content. Then the chilled flammable liquid was pumped out and transported by tanker truck to a disposal site elsewhere for incineration. "The situation was neutralized," Goss explained.

But the question remains:

Who would have been responsible if an explosion had occurred? Who would have paid the damages? The contractor? Property owner? Lessee? Government? Insurance company? Real estate broker involved in the sale of the site to Goss's unknowing client?

Potential broker liability in such cases has state and national trade groups concerned. "We have a subcommittee investigating it," Clark Wallace, a Moraga, Calif., real estate broker and president-elect of the National Assn. of Realtors, said, "and we hope to have some tentative recommendations for members drafted at our convention in New Orleans." The convention, where Wallace will be installed, is under way now and ends Tuesday.

Realtor concern stems mainly from a 1984 California Court of Appeal ruling holding real estate brokers responsible for disclosing "reasonably discoverable facts (those that the broker should have known)" as well as known material facts affecting the value or desirability of a property for sale.

"Nothing has gone as far in other states," Wallace said, "but in most cases, California leads, and the rest of the nation follows." So the ruling is of concern to real estate brokers and salespeople nationwide.

A landmark case (Easton vs. Strassburger) involved a home on a landfill. New buyers took possession. There was a massive earth movement and the residence was destroyed. The seller, contractor and listing agents were held liable.

Charles S. Vogel, an attorney with Sidley & Austin in Los Angeles and president of the Los Angeles County Bar Assn., told a group of industrial realtors meeting in Century City that the ruling was "significant because it was the first time that a broker was held liable for simple negligence . . . the broker discovered red flags, nets on the embankment and uneven floors, but didn't perform a soils test, and the seller didn't reveal prior earth movement to the broker.

"This had nothing to do with misrepresentation. The broker revealed all that was known to him, but ignorance is no defense. The broker must be able to demonstrate that he made a reasonable and competent inspection."

The California Assn. of Realtors initiated legislation specifying that the Easton ruling apply "only to residential properties of one to four units." The bill--SB 453, introduced by Sen. Alan Robbins (D-Van Nuys)--has just been signed into law.

"Easton does relate to residential real estate, but it probably has some precedental aspects that are subject to more interpretation," Wallace said.

Vogel added:

"The standard of care shouldn't be any different with commercial/industrial properties. In fact, if you hold yourself up as a specialist, you might be held up to a higher standard of care."

What most concerns the real estate brokerage community about the Easton ruling are the words "reasonably discoverable facts" and such uncertainties as those that frequently involve hazardous wastes.

Even the term "hazardous waste" causes confusion. Legal definitions are complicated. For laymen, Angelo Bellomo, chief of the Southern California Section, Toxic Substances Control division of the state Department of Health Services, defines "hazardous or toxic waste" as "any chemical substance that if handled improperly can present a hazard to public health and our environment."

However, as a scientist, he concedes that "any chemical" could mean simple table salt.

"We don't know what hazardous waste is. So how can we know what our liability is?" Wallace questioned. "How can we defend ourselves when we can't even define toxic waste? Is it something that seeps into a property from a mile away or 600 yards away? Is it in the air? Is it a liquid? We don't know.

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