Q: Our real estate attorney misread an estimate to remediate the underground storage tanks on the property we purchased. The sellers had started to remove and remediate some old underground oil storage tanks. The seller’s attorney and our attorney ended up recommending that we take a credit for the remediation estimate rather than have the seller finish the job.
We closed and then found out our attorney did not read the remediation estimate correctly. The attorney never sent us the estimate either. The estimate was for only one of the three areas that needed to be remediated and did not include the transportation charge for any contaminated soil.
Our attorney has taken no responsibility for his actions. The sellers refused to do anything because the estimate was accepted and the closing had occurred. We were never given a chance to review documents, lab results, etc., with our attorney. The attorney never warned us of the consequences associated with buying a property with contamination and our attorney never requested any money be put into escrow in case the remediation cost was inaccurate.
Our attorney specifically stated he would get documents relating to the remediation started by the sellers but never finished. Now we have a nightmare on our hands with remediation estimates up to $100,000. We have looked into hiring an attorney but have had no luck. We contacted five attorneys, and none of them would take on the case either because there was too little money involved or they don’t want to sue another attorney.
Our attorney’s position is that we accepted the seller’s estimate so there is nothing he can do. All of these issues could have been avoided if our attorney had kept us informed and had sent us the documents to review. What should we do?
A: What an expensive, unfortunate mess. From what you have described, it does not appear that you received the representation you deserved and, presumably, paid for. We are sorry you are in this situation. When it comes to environmental matters, Sam always advises his clients to not close on the property (commercial, industrial or residential) until the issue is resolved.
In some parts of the country, buyers typically hire a real estate attorney to represent them in the purchase of a home. That attorney will work for the buyer and has a duty to represent the buyer and advocate for the buyer. In states where a buyer hires an attorney to act as a settlement agent, the attorney does not have a duty of loyalty to the buyer. The buyer has to make sure that they understand what they are getting into before sending money to close or agreeing to close on a purchase of a home.
We believe that whether you live in a state where buyers typically hire attorneys to help close house deals or not, you should hire a real estate attorney if you have a serious environmental issue with the home you want to purchase.
What kind of environmental issue would give us pause? Lead paint, asbestos tiles or insulation, elevated levels of radon gas, and mold issues are the top environmental issues you’ll find in homes.
While environmental issues can be a cause for alarm, there are different degrees of harm:
- Where there are elevated levels of radon gas, you may be able to remediate the problem by installing a radon mitigation system for less than $2,000.
- Lead pipes are a big concern and can be costly to replace. A main water supply line may cost up to $20,000, or more.
- Mold is always problematic. But if the mold (and the water infiltration causing the problem) is contained, it might be an easy fix. However, if mold is everywhere in a home, it can be a huge problem.
- Asbestos tiles or insulation requires specialists who are licensed to remove and dispose of the material. It can be an expensive job depending on the size of the problem.
In all of these cases, you can get a handful of estimates for the remediation, and those will generally be on target. When it comes to underground storage tanks, the problem can be minor or huge. A minor problem is a small residential tank that needs to be removed but there is no evidence that the tank leaked. Multiple tanks and leaking tanks raise the price for removal. You may even have to pay to clean the soil. But you won’t know for sure until you investigate further. Depending on the situation, you may not know the true extent of the problem until you begin the process of removing the tank.
Sam has had several clients that had tanks removed from properties. Some of these were removed before closing and some well after closing — because they weren’t known to exist. In urban areas, these tanks tend to be small oil tanks. Luckily, none of the tanks had breached and the cost to remove the tanks was in line with the estimates.
The big issue with oil tanks is whether they have leaked. When they do leak it’s quite expensive to remove the contaminated dirt, place new dirt and restore the area. The bigger the tank, the bigger the risk. The more tanks, the greater the risk.
Your attorney should have kept you in the loop on the negotiations with the seller. He should have discussed the risks involved with undertaking the removal of the tank based on an estimate. And, he should have sent you the estimate(s) and kept you advised of what was happening with them in the transaction.
Hindsight is 20/20. Had the environmental company done the work in line with the estimate, you would not be complaining even if the attorney had not kept you informed. But the situation got way out of hand, and you’re now left footing an expensive bill.
Here are some issues to think through: What amount of disclosure on the tank issue was required of the sellers under the laws of your state? Did the sellers give you sufficient disclosure of the issue? Since the seller started the removal, did the sellers have a duty to complete the removal? Does your agreement to complete the removal absolve the seller from issues that were not disclosed in the estimate?
We know that you talked to several attorneys and didn’t get anywhere. If you live in a larger city, you should be able to find an attorney that handles seller disclosure issues in residential real estate transactions. You may also want to discuss your situation with an attorney that handles malpractice claims against other attorneys. While you have quite a bit of information that indicates that your attorney didn’t represent you adequately, you will need to have someone look over the details of your file to see if you have a case against the seller on the disclosure issue or under the contract. Secondarily, you need to evaluate whether you have a claim against your attorney for their representation of you.
Lastly, we remind our readers that if you haven’t hired an attorney to specifically represent you in a closing, you do not have legal representation. If something goes wrong in the transaction, that may have financial consequences. In these areas of the country where attorneys are not used to help buyers or sellers close their deals, any attorneys in or around the deal act as settlement agents or closing attorneys or are attorneys representing the lender. These attorneys merely work to close the transaction but do not represent the seller or the buyer in the closing. They do not owe you any fiduciary duty.
The seller and buyer are left to make their own decisions and judgments, including whether to proceed and close on the home.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)