Environmental Disclosure Laws in Real Estate: Your Legal Duty to Inform Buyers and Tenants

In California, real estate owners owe various legal duties to inform prospective buyers and tenants of environmental hazards on their properties. Noncompliance with these legal duties can expose owners to substantial liability, so it is essential to work closely with an experienced California environmental attorney to ensure compliance.

Of course, in addition to disclosing environmental hazards, owners of commercial and residential properties may also be required to make various other disclosures. As a result, this article is not a comprehensive guide to real estate disclosure compliance in California. Rather, this article covers four key (but non-exclusive) environmental disclosure considerations for real estate sellers and lessors.

Environmental Disclosure Requirements for Real Estate Sellers and Lessors in California

For property owners in California, environmental disclosure requirements exist under both state and federal law. Four of the key disclosure obligations property owners should address when selling or leasing their properties are:

1. California Environmental Hazard Disclosure Requirements

Under California law, sellers must provide prospective buyers with a general disclosure regarding the risks associated with environmental hazards. As the California Department of Real Estate explains, sellers can generally satisfy this requirement by providing buyers with a pamphlet prepared by the California Environmental Protection Agency (Cal EPA):

“The seller or the seller’s agent(s) may give the buyer of real property subject to Section 1102 of the Civil Code or of any other real property, including manufactured housing as defined in Section 18007 of the Health and Safety Code, a pamphlet entitled, ‘Environmental Hazards: A Guide for Homeowners, Buyers, Landlords, and Tenants.’ If the buyer receives the pamphlet, neither the seller nor any agent in the transaction is required to furnish more information concerning such hazards, unless the seller or the agent(s) has/have actual knowledge of the existence of an environmental hazard on or affecting the property.”

Providing this pamphlet to a prospective buyer can satisfy a property owner’s general duty to warn buyers about the risks associated with asbestos, formaldehyde, radon, lead, fuel or chemical storage tanks, and contaminated soil or water. However, if a seller has “actual knowledge” of an environmental hazard on the property, then additional disclosures are required.

2. California Disclosure Requirements for Buyers with Actual Knowledge

If a property owner has actual knowledge of an environmental hazard “on or affecting” the property that the owner is intending to sell, then the owner has additional disclosure obligations under California law. In this scenario, providing a prospective buyer with a copy of Cal EPA’s Environmental Hazards: A Guide for Homeowners, Buyers, Landlords, and Tenants pamphlet is not enough.

What is enough? The answer to this question depends on both the nature and scope of the environmental hazard in question. To ensure that they meet their disclosure obligations, real estate owners who are aware of an environmental hazard on their property will need to work with an experienced California environmental attorney to determine what level of disclosure is sufficient under the law.

3. California Hazardous Substance Disclosure Requirements for Nonresidential Real Estate Transactions

California law imposes additional hazardous substance disclosure requirements for nonresidential real estate transactions. Under Section 78700 of the California Health and Safety Code, “[a]ny owner of nonresidential real property who knows, or has reasonable cause to believe, that any release of hazardous substance has come to be located on or beneath that real property shall, prior to the sale, lease, or rental of the real property by that owner, give written notice of that condition to the buyer, lessee, or renter of the real property.”

While the disclosure requirement discussed above applies exclusively to sellers who have “actual knowledge” of an environmental hazard on or affecting the property, this requirement applies to all property owners who either know or have “reasonable cause to believe” that a hazardous substance is on the property or in its soil or groundwater. Notably, however, Section 78700 also provides that if a property owner has actual knowledge of the presence of a hazardous substance and “knowingly and willfully” fails to disclose it, the owner can face a civil monetary penalty of $5,000—in addition to the risk of facing litigation with the purchaser or tenant.

4. Federal Lead Paint Disclosure Requirements

At the federal level, one of the primary environmental hazard disclosure obligations that applies to property owners is the obligation to disclose the presence of lead-based paint. As the Environmental Protection Agency (EPA) explains:

“The Lead-Based Paint Disclosure Rule requires sellers, landlords, real estate agents and property managers to provide specific information about known lead-based paint and lead-based paint hazards before prospective renters and homebuyers sign a lease or contract. This requirement applies to most pre-1978 private housing . . . .”

As EPA further explains on its Lead-Based Paint Disclosure Rule Fact Sheet, property owners who are subject to the Lead-Based Paint Disclosure Rule must meet various requirements. These include (but are not limited to):

• Providing buyers and renters with a copy of EPA’s Protect Your Family from Lead in Your Home pamphlet;
• Disclosing any known information about the presence of lead-based paint or lead-based paint hazards on the property;
• Providing “all available records and reports” pertaining to lead-based paint and lead-based paint hazards on the property;
• Providing a “Lead Warning Statement,” which can be included in the purchase contract or lease for the property; and,
• Providing homebuyers with 10 days to conduct a lead-based paint inspection or risk assessment.

Similar to California’s environmental hazard disclosure requirements, noncompliance with the federal lead-paint disclosure requirements can have serious consequences. Under federal law, lead-based paint disclosure violations can expose sellers and lessors to liability for treble damages as well as civil or criminal penalties.

Speak with an Experienced California Environmental Attorney at Bick Law LLP

If you are preparing to sell or lease a property in California and have questions about your environmental disclosure obligations, we invite you to contact us. To speak with an experienced California environmental attorney at Bick Law LLP, please call us at 949-432-3500 today.