By ERIC FREEDMAN
Capital News Service
LANSING – A couple who bought a South Haven condo built on contaminated land two blocks from Lake Michigan is entitled to about $470,000 in damages from the Realtor and her real estate agency that handled the deal, the Court of Appeals has ruled.
The Realtor who handled the deal knew that sales brochure information about environmental conditions at the 10-unit Factory Condominium redevelopment project – Belgravia – was false, the court said.
Meryl Greene of Coldwell Banker Weber-Seiler Realtors also failed to tell purchasers Gary and Kathleen Bowman of Augusta that the Department of Environmental Quality (DEQ) had found the property still “highly contaminated with chlorinated solvents in the soil and groundwater, and metals in the near-surface soils.”
The abandoned building where the Bowmans’ condo is located had been a factory from 1916 to 1979 that made coffins, gun stocks, pipe organs and other products. According to legal documents and the DEQ, workers dumped industrial solvents, sludge and wastes from painting and plating that contained toxic materials – some linked to cancer – into the drains.
A developer, who later declared bankruptcy, hired Greene to market the condos. She prepared a brochure that falsely stated that “the property has been addressed under current Michigan cleanup requirements,” the court said.
The state spent $3.8 million on cleanup, and South Haven spent additional city funds, but there has been no final remedy, said DEQ district supervisor Frank Ballo in Kalamazoo.
Since the developer’s bankruptcy, the condominium association has operated and monitored the vapor mitigation systems “to assure that the building remains safe for the occupants,” Ballo said. The DEQ hasn’t paid for a final remedy, “however, due to the expense of the remedies, the fact that acute risks were being adequately addressed by the existing systems and available DEQ funding sources had been depleted and was focused on higher-risks sites in the state.”
In 2004, Greene handled the Bowmans’ purchase of a $360,000 unit.
A year later the Bowmans learned of the contamination. They sued Greene, her agency and the seller for fraud, misrepresentation and violation of the state law requiring sellers to disclose environmental problems to buyers.
A Van Buren County jury awarded them $483,195, which was reduced by a $12,500 settlement from the previous owner.
In a unanimous decision, the three-judge Court of Appeals panel found enough evidence to support the jury award.
“There was testimony that Greene told the purchasers that the condo did not have any environmental issues,” the court said. “They testified that they relied on the brochure in deciding to purchase the condo and they thought the property had been cleaned up.”
And a letter the DEQ had sent to Greene and the developer before the sale supported the claim that the marketing brochure was misleading, the court said.
The court noted that Greene lived “down the street” from the condo development, was present when concrete was poured over the protective vapor barrier and had discussed the contamination with the developer.
The court rejected the defense argument that the state’s Seller’s Disclosure Act applies only to the individual condo unit rather than the entire development.
The law applies to environmental problems “that relate to, affect and influence not only the dwelling unit itself but also the land upon which the dwelling unit is situated,” the appeals court said.
Earlier, Greene and her real estate firm had lost a misrepresentation and fraud suit by the owners of another unit, according to Grand Haven attorney Mike Risko, who represented the plaintiffs in both cases.
Greene and her attorney, Leonard Henk of Bloomfield Hills, declined to comment.
By ERIC FREEDMAN