SELLERS AND REALTORS NEED TO KNOW FACTS TO AVOID LIABILITY

Homeowners need to ensure that they have access to drink-able water, often referred to as "potable" water. There are generally two kinds of sources of drinking water. Some comes from reservoirs. The rest comes from groundwater, either through private wells, or wells that are owned by water supply companies. Recent reports are suggesting that many wells which supply drinking water in this country may be contaminated by a potentially harmful gasoline additive called "MTBE."

IMPACT UPON SELLERS/RELATORS

As to sellers and real estate professionals, this problem has two dimensions. First, a house without drinking water is a house that has no value. Drinking water problems, including MTBE contamination, must be addressed in order to re-establish marketability.

Second, court decisions throughout the United States have expansively interpreted the liability of sellers and Realtors who do not share knowledge of material problems, such as drinking water problems, with would-be purchasers. While every case must be separately evaluated, the best rule is a bright line rule -- when a seller or Realtor knows of a material problem, he or she should disclose it. Otherwise, the seller/Realtor may be liable for fraud or misrepresentation. In some States, these claims can lead to punitive damages and payment of attorneys fees.

Thus, the expanding MTBE problem is significant to both sellers and the professional real estate community. Realtors should be in tune with local ground water conditions and should painfully ensure that all disclosure requirements regarding drinking water problems are satisfied.

LEAKING TANKS ARE A MAJOR CONTRIBUTOR

One major source of the MTBE problem: leaking gasoline underground storage tanks located at gas stations, trucking companies, and other locations. Many service stations have multiple tanks, one or more for regular unleaded, one for high test, and sometimes one for diesel fuel. A lot of the older underground tanks were made of metal that is now deteriorating and leaking. When gasoline containing underground storage tanks leak, gasoline often flows directly into ground water that is then collected in drinking water wells.

The problem is that gasoline often contains MTBE, a fuel additive that is technically called "methyl-tert-butyl ether." MTBE is added to gasoline throughout the United States to increase octane levels and to reduce smog forming carbon monoxide. The EPA considers MTBE to be a "possible human carcinogen," meaning that it may cause cancer in humans. Recent studies by the federal government have detected MTBE in 27% of the urban wells that were sampled. Under 2% of the agricultural area wells contained MTBE.

At present, the EPA has established a drinking water limit for MTBE of 20 micrograms per liter. According to the government, lifetime exposure to MTBE below this level is not expected to cause harmful health effects. Three per cent of the sampled urban wells detected MTBE levels that exceed this safe level.

SEVERAL COMMUNITIES THUS FAR IMPACTED

Recently, homeowners throughout the United States have complained about MTBE. In July, residents of several Virginia communities learned that their drinking water contained the additive. Homeowners there attended community organization meetings to determine necessary steps to safeguard their water supply. And, in August, Maryland health officials announced that MTBE levels over 100 times the safe level were found in one home's well water .

Recently, MTBE contamination prompted a California environmental group, Communities For A Better Environment, to file suit against eight oil companies. The suit alleges that while oil companies knew, or should have known, that MTBE may pose a health threat, the companies nonetheless added it to their gasoline. The City of Santa Monica, California, recently also sued oil companies because MTBE contamination forced the closure of half of its drinking water supply wells.

It appears that drinking MTBE isn't the only problem. Breathing it has also reportedly made some sick. In 1992, some 200 residents of Fairbanks, Alaska reported problems such as headaches and nausea after breathing air containing MTBE car exhaust. Similar complaints have also been registered in Montana, Wisconsin and New Jersey.

California has mounted an MTBE counter offensive by recently enacting three anti-MTBE laws. One, the Local Drinking Water Protection Act, appropriated $5 million annually to control MTBE discharges. Another law, the MTBE Public Health and Environmental Protection Act, provides for the study of MTBE to determine whether it poses a risk to human beings and requires additional safeguards to prevent MTBE from entering drinking water supplies.

WHAT SHOULD PROPERTY OWNERS DO?

When MTBE contamination is detected, there are several approaches that are available. If the problem is severe enough, an alternate drinking water supply may be required. This can mean providing bottled water, or connecting to a public water company. In other instances, filters or other water cleansing devices can be installed to a drinking water well to purify the water before it is consumed.

The extent that MTBE represents a health hazard is still not known. However, the EPA, and others, suspect that at certain concentrations this substance can be dangerous if consumed.

Drinking water quality is clearly very important to any home purchaser. Therefore, the purchaser should test any on-site well before purchasing. If MTBE is detected, a professional should be consulted. If a public water supplier relies on wells, sample results should be obtained from the supplier and evaluated.

Information is knowledge, but it is also a source of possible liability. Any seller who knows that his or her well is contaminated must evaluate whether disclosure is required, and if so, what kind is required. In addition, Realtors want to be very careful about any representations that they make to purchasers concerning the quality of water available at any residential location.