ASBESTOS TESTING ISSUE
We wholesaled a small multi-family deal to one of our buyers. The property had a sewer line damage and an insurance claim that had since settled. Seller provided us with an asbestos report which showed that 6 samples were done and all samples tested negative. Buyer purchased as-is. Subsequent to closing escrow, one of the units caught fire and in the process of the fire investigation, it was discovered that there was in fact asbestos behind the drywall. I have since learned there are 2 layers of drywall and you have to test both layers. Apparently, the testing company did not test for both layers. In addition, i have learned that there should've been about 30 samples tested for as opposed to only 6. I'm concerned the asbestos testing company's defense may be that they only tested the units for the damage related to the sewer line backup and not a full inspection. Don't know if that makes any sense.
What recourse does my buyer have, if any, at this point, as he is obviously dissatisfied with the purchase and is blaming the seller for non-disclosure even though the seller claims the report they sent is the only report they are aware of.
Asbestos is not nuclear waste. In the early part of the 20th century insurance companies gave you a discount the more asbestos you had. Imported drywall as late as 1985 still had traces of asbestos. There is still a lot more of it out there than you would think. Most if it is not in a condition that it would cause any health issues.
If the Asbestos Containing Material (ACM) was undisturbed, it should have been fine. Since this ACM was under another layer of drywall, it would have been considered encapsulated, with negligible risk to anyone. How much testing should have been done due to the sewer damage would be a requirement of local laws. I suspect the testing company knew the appropriate number of samples.
Hopefully the owner has good insurance. If so, insurance will cover for the cleanup and repair.
I'm not an asbestos expert, but I believe encapsulation is a legal remediation method.
If so what is Buyers problem; insurane not paying for damage or raising rates?
Quote from @Scott Mac:
I'm not an asbestos expert, but I ttelieve encapsulation is a legal remediation method.
If so what is Buyers problem; insurane not paying for damage orr raising rates?
As a wholesaler on this transaction, I am trying to support my buyer's contention that the seller did not adequately disclose all the issues with respect to the condition of the property which include possible reliance upon an inadequate asbestos report, issues with tenants refusing to vacate, etc. but at the same time know that he executed an as-is contract. In addition, the buyer had met and had conversations with the seller directly whereas all I did was assign the contract. He is further asserting that whatever settlement he receives from insurance will not bar or affect his ability to pursue possible legal remedy against the seller. His choice, which may change over time. If it were me, I would want to see how much the insurance would cover first and assess from there, but I'm not the buyer. Worst case, there's also the option, depending on the price, to resell the property to another buyer or even back to the seller. If my buyer can unwind the deal and just get his money back without any profit, he would do it in a heartbeat.
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Asbestos is so highly over played nowadays. Bunch of Govt BS is all it really is......
Having said that, make sure you do it right because in some states (like CA) the fines are enormous...like $30k first offense.
Quote from @Tim Silvers:
Quote from @Scott Mac:
I'm not an asbestos expert, but I ttelieve encapsulation is a legal remediation method.
If so what is Buyers problem; insurane not paying for damage orr raising rates?
As a wholesaler on this transaction, I am trying to support my buyer's contention that the seller did not adequately disclose all the issues with respect to the condition of the property which include possible reliance upon an inadequate asbestos report, issues with tenants refusing to vacate, etc. but at the same time know that he executed an as-is contract. In addition, the buyer had met and had conversations with the seller directly whereas all I did was assign the contract. He is further asserting that whatever settlement he receives from insurance will not bar or affect his ability to pursue possible legal remedy against the seller. His choice, which may change over time. If it were me, I would want to see how much the insurance would cover first and assess from there, but I'm not the buyer. Worst case, there's also the option, depending on the price, to resell the property to another buyer or even back to the seller. If my buyer can unwind the deal and just get his money back without any profit, he would do it in a heartbeat.
If your buyer knew what he was doing he would make more money by having insurance fix the building.
In 2019 we had a tornado take out big sections of two buildings. The State required asbestos testing and, sure enough, found some. We had to have the vinyl tile in several kitchens remediated. However, all said and done, insurance more than paid for the repairs. All our investors were better off for having been affected by a tornado and having to remove some asbestos.