Toxic Waste Pockets Make Property Buyers Step Carefully : Costly Surprises May Lurk in Buildings, Underground

At a construction site in Huntington Beach, environmental scientist James J. Severns once found an automobile buried beneath a layer of thick oily sludge that looked like asphalt pavement.

Severns surmises the car sank after someone mistakenly parked it on the sludge, although nobody really knows how it got there. The subdivision planned for the site was held up for more than a year while the sludge was removed.

Even Southern California’s relatively short past yields lots of these surprises, including nasty and expensive problems such as toxic waste.

In fact, toxic substances are so prevalent in Orange County and across Southern California that few buildings or land parcels are sold these days without an extensive check for contamination, as some buyers have learned to their regret.

“I’ve had clients who inadvertently purchased sites only to find out later there was contamination,” said Severns, an owner of BCL Associates, an environmental consulting firm in Huntington Beach.

“What’s worse, when they go back to the seller,” he said, they are told “ ‘Let the buyer beware.’ ”

Lender Can Get Stuck

With tougher environmental laws, it sometimes doesn’t matter whether the old owner or the new owner did the polluting; what matters is who is still around and can afford to clean up the mess. Even the new owner’s lender can get stuck with the bill.

So worried are buyers and lenders that they are insisting new property be thoroughly checked for contamination, prolonging for months the time it takes to close some deals.

“There have been instances where you think a deal is going to take three months to go through, and it winds up taking nine,” said Mike Merk, a Grubb & Ellis Co. broker in Anaheim.

Environmental consultants, like Severns, say they have clients lined up around the block.

Real estate brokers are so nervous they are demanding waivers of responsibility in case the buyer discovers that his new building was erected over buried toxics.

“Almost every industrial building or site has something in it,” said James M. Springer of brokerage Cushman & Wakefield Inc. of California, who has written about the problem.

“Even if a building site seems real clean and pretty, there’s probably been something dumped on it in the last 15 or 20 years.”

Asbestos in Some Buildings

Office buildings and other commercial structures are also widely suspected of being contaminated, experts say, very often with good reason. In addition to hazardous waste, many older office buildings contain asbestos insulation.

These days toxic wastes don’t just ooze from dumps: A pit full of industrial solvent could be buried and forgotten under the parking lot of an innocuous office building, or old underground tanks could be leaking small amounts of gasoline, sometimes long after the gas station itself is only a memory and the site an empty lot.

Even pristine farmland can be tainted with pesticide residue.

Quite often these wastes aren’t an imminent danger; but if left undiscovered or unchecked, they could eventually seep into water supplies or even into the air in the form of harmful vapors.

Consider these facts:

The Orange County Health Care Agency is supervising the cleanup of 450 leaking underground tanks, most of them containing gasoline. And those are just the tanks that the agency knows are leaking. There could be more, since Orange County has 10,000 underground storage tanks. The tanks are one of the state’s biggest environmental worries.

About 5,000 businesses in the county generate hazardous wastes as part of their operations, the health department estimates. Most of them are law-abiding when it comes to disposing of that waste. But for a few, the temptation to cut corners is just too great: Rather than pay the stiff costs of legally disposing of the stuff, they dump it in vacant lots at night. “Waste disposal costs have increased tremendously in the last few years, so this kind of thing is becoming a frequent occurrence,” said John Hills, who is in charge of the waste management section of the county Health Care Agency.

Solvents, heavy metals and other chemicals that have leaked into the ground pose the greatest threat to underground water supplies. Three municipal wells in Anaheim were shut down after Mobil Oil Corp. spilled gas from an above-ground tank in 1982. Another municipal well has since been shut down in Orange, and 12 more wells in the county--eight of them private--contain more contaminants than state law allows.

Most of those wells are contaminated with traces of industrial solvents used by companies to clean machinery or manufacture high-technology products. But the solvents are often hard to trace back to their source, said Kurt Berchtold, lead senior engineer for the state Regional Water Quality Control Board in Santa Ana. “Then we have a lot of other contamination sources we do know about, that if left unchecked could be harmful to the ground water,” Berchtold said.

Among the worst: A leak from a tank that once held cleaning solvents at a McDonnell Douglas Corp. plant in Huntington Beach and leaking acid used to etch metal parts for aerospace industry at the Aerochem Inc. plant in Orange. Those and other known sources of contamination, are being cleaned up.

Less than five years ago, few buyers knew or worried about this kind of toxic contamination. Then the federal and state government got tougher on finding and cleaning wastes. And it turned out there were far more toxic substances out there than anybody had suspected.

“Southern California’s unusual to the extent it has a lot of old-line heavy industries that are moving inland or to other states, and those old buildings are being torn down and the sites extensively redeveloped,” said William S. Schrader Jr., a partner in one of Texas developer Trammel Crow Co.’s Orange County offices.

“So you tend to encounter this situation a lot.”

Trammel Crow was forced to delay construction of a shopping center in Stanton when it found toxic wastes the old owner had missed in cleaning up the site. The former owner spent roughly another $50,000 cleaning it up, Schrader said.

Land Leased to Gas Station

But that was a relatively small problem. Consider the case of Arthur Spitzer of Beverly Hills, who leased a corner he owned on Magnolia Street and Westminster Boulevard in Westminster to Gulf Oil Corp. in 1961 for a gas station.

In 1980 Gulf sublet the lot to another gas station operator, Target Enterprises, and a year later assigned the lease to another oil company, Thrifty Oil Co. In 1984, Gulf was gobbled up by Chevron, a subsidiary of Standard Oil Co. of California.

Two years ago, when the lease was up, Spitzer leased the land to a Los Angeles developer for a small shopping center called Magnolia Place. When the underground gas tanks were dug up, it was discovered they had leaked. The regulatory agencies wanted the place cleaned up.

In order to save the deal with the developers, Spitzer says he spent $300,000 on consultants and in actually digging up the contaminated dirt, airing it to let the gas evaporate and putting it back in the lot. Now he is suing Chevron, and Chevron has filed its own complaint in the suit against Target, which has filed its own complaint against Chevron and so on.

“I could have shifted it to Gulf Oil,” Spitzer said, “but the time was so short I went ahead and paid for it myself.”

Spitzer, Chevron and the others are now trying to negotiate a settlement out of court.

The stakes are getting higher all the time. Under expanded state and federal laws, the current owner can get stuck with part or all of the bill for cleaning up toxic wastes on his property even if he didn’t do the polluting.

If the new owner didn’t check thoroughly enough to determine whether the building was contaminated, he shares the liability. And if the old owner can’t be found or can’t pay his share, then the new owner can get stuck with that share, too, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980--also known as Superfund--and state law as well.

Jungle of Lawsuits, Agencies

And should the new owner go belly up while hacking his way through the resulting jungle of lawsuits and regulatory agencies, his lender can get stuck with the bill if the financial institution forecloses.

“The whole point of the law is to freeze the property out of the market” and create an economic incentive to clean it up, said James Dragna, formerly a lawyer for the federal Environmental Protection Agency now in private practice in Los Angeles.

“If you impose broad liability on the buyer, he’s either not going to buy the property or he’s going to force the seller to clean it up first.”

So far the strategy seems to have had the desired effect.

“There are incredible hoops you have to go through to buy a piece of property now,” grumbles one developer in north Orange County, who declined to be named.

“It’s mostly coming from satisfying the lenders.”

One lender that got stuck was Great Western Bank in Beverly Hills. In 1983, Great Western bought another thrift that was building an office building on Derian Avenue in Irvine, on top of what had once been a Great Lakes Chemical Co. pesticide plant.

On a hot July day that year, a bulldozer driver felt ill and began vomiting. Investigators soon discovered that the driver had uncovered a pit of ethylene dibromide, which can cause cancer when absorbed through the skin or even if inhaled. EDB, as it is called, is used in pesticides. Over the next few years, environmental consultants would discover traces of EDB and other toxic substances in soil under the parking lot around the building.

And Great Western is still stuck with the problem of convincing environmental agencies that the problem is nearly cleaned up.

Cases like this mean the work keeps stacking up for the environmental consultants. BCL Associates, for example, has gone from a couple of jobs a month checking property involved in deals to more than a dozen.

It is not cheap work: BCL’s Severns and environmental consultants like him charge up to $100,000 for an exhaustive probe of a property.

And inevitably, some of those checks will turn up serious problems.

Said Severns: “There are buildings out there you wouldn’t want to work in.”