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Colorado Methlab Real Estate Discovery and Disclosure

Horror stories abound... home buyers purchase a new dream home only to find they have moved into a toxic terror – an ex methlab.

Senator Shaffer, sensitive to these ordeals, attempted to introduce legislation that would protect Colorado homebuyers. That Act was Senate Bill SB06-002. The resulting legislation, although laudable and noble in nature, actually did not offer much for the consumer, since most of the protections identified by the bill were already available to the home buyer anyway, and the bill actually requires the identification of old methlabs to be removed from listings. Overall, the Bill was poorly written in the context of existing regulations and statutes and actually created problems in that it muddied the legal waters by introducing ambiguities and conflicting language into the existing methlab statutes.

Furthermore, ironically, the original contained language that permitted the seller to legally withhold information that the property was once an illegal drug laboratory, by requiring remediated properties to be removed from ALL government-sponsored informational services that list properties that have been used for the production of methamphetamine. Therefore, whereas prior to the legislation, a prospective buyer could easily determine if a property had been used as a methlab, this bill makes that determination more difficult.

On May 1, 2006, the bill was signed by Governor Owens and became codified in Title 38 (Property – Real and Personal) of the Colorado Revised Statutes, Article 35.7 (Disclosures Required in Connection with Conveyances of Residential Real Property), as amended SB09-060.

In 2009, the codified statute was amended. Ostensibly, the amendment was designed to clarify the statute by alluding to the State Regulations. Unfortunately, the authors of the clarification didn’t appear to understand the language of the regulations, and thus introduced more ambiguity than existed before the amendment.

The Bill begins by introducing its first ambiguity:

38-35.7-103. Disclosure - methamphetamine laboratory. (1) A buyer of residential real property has the right to test the property for the purpose of determining whether the property has ever been used as a methamphetamine laboratory.

For a start, prior to this legislation, such a “test” may not have been necessary since the property may have already been listed on a government-sponsored list of properties – a listing that is now prohibited by the bill. Prior to this bill, a prospective buyer would not have to test a previously known property, they could have merely gone to the internet and looked the property up on existing databases.

Although the term "Illegal Drug laboratory" is defined by State statute (CRS 25-18.5-101(2.7)) nowhere in the bill or otherwise in state statutes or state regulations is the term “methamphetamine laboratory” defined. "Illegal Drug laboratory" is defined by statute and means any area where controlled substances have been manufactured, processed, cooked, disposed of, used, or stored and all proximate areas that are likely to be contaminated as a result of such manufacturing, processing, cooking, disposal, use, or storing.

The statute essentially states that a prospective home buyer may have an Industrial Hygienist perform a “test” in a home. The nature of the “test” is not identified, neither are the parameters of the “test,” rather, the statute alludes to the State Regulations saying the “test” is to be conducted according to those regulations. However, the “testing” protocols in those regulations are not a “test” but a process incumbent on the known status of the property, and the testing protocols change with that status.

According to the referenced regulations, during a “Preliminary Assessment,” nowhere in the referenced regulations is the Industrial Hygienist required to collect any samples at all. During the Preliminary Assessment, the only “test” the Industrial Hygienist is required to perform is to test the "Pre-decontamination hypothesis" which is described as:

In pre-decontamination sampling, the assumption (hypothesis) is made that the area is clean i.e. “compliant,” and data will be collected to find support for the hypothesis. Data (such as samples) are collected to “prove” the area is compliant. Sampling, if it is performed, is conducted in the areas with the highest probability of containing the highest possible concentrations of contaminants. Any data that disproves the hypothesis, including police records, visual clues of production, storage, or use or documentation of drug paraphernalia being present, is considered conclusive, and leads the consultant to accept the null hypothesis and declare the area non-compliant.

The authors of the amended statute did not realize that not only are there several data quality objectives imbedded in the State regulations, but that none of those data quality objectives are appropriate for a cursory evaluation of a property for the purposes of a real estate transaction. The language in the statute stems from the “CSI Effect” wherein there is a misconception in the public’s eye that a scientist can perform a simple “test” and magically answer virtually any question, just like the forensic scientists on a T.V. program.

Following the undefined “test,” if the indicate that the property has been contaminated with methamphetamine or other contaminants, the buyer is required to “promptly” notify the seller. The seller has thirty days to hire a second Industrial Hygienist who may similarly conduct any kind of undetermined “test” to confirm the first undefined “test,” but cannot use the data from the second test to refute the first test.

However, whereas the objective of the first test is to determine “contamination,” the objective of the second test is explicitly to determine if the property was a “methamphetamine laboratory.” Therefore, the objectives of the first “test” and the objectives of the second “test” are completely different and cannot be compared. In the first “test” one is looking for contamination (regardless of how it got there” and in the second “test” one is looking for evidence of a specific process (regardless of contamination). The second test (and any other subsequent "tests") cannot actually be used to refute the first test.

By statute and regulation, the seller must accept the presumptive positive first “test” and presume an illegal drug laboratory is extant, and therefore follow the procedures outlined in State regulation 6 CCR-1014-3, to bring the property into compliance.

Testing notwithstanding, the Bill explicitly requires any seller to automatically disclose knowledge of whether the property was used as a “methamphetamine laboratory,” but does not define what constitutes a “methamphetamine laboratory.”

Therefore, a property owner, with a property contaminated by methamphetamine (and an host of other toxic materials associated with meth production) who has used the property to extract pseudoephedrine but shipped the material to a second location for processing, and has received methamphetamine base, and has processed the methamphetamine base with solvents and extracted the meth, and processed the meth for street consumption, can legitimately not disclose the information since the property owner did not actually manufacture the meth at the property.

The problem lies in that the legislators failed to use existing definitions, and failed to mesh the new statute language with existing language.

The bill however, does require a seller who fails to make such a disclosure liable for any remediation costs associated with the property; but does not require the seller to cover the Industrial Hygienist’s costs of the “Preliminary Assessment” or the final verification testing and issuance of the Industrial Hygienist’s “Decision Statement.” The lack of definition of these costs will certainly prove fertile ground for attorneys litigating the associated responsibilities of the seller; a situation that did not exist prior to the promulgation of the bill.

The Bill also makes the seller responsible for any costs associated with chemical injuries as a result of methamphetamine production; but does not include any of the chemical injuries that may be sustained from an illegal drug lab unless the property owner was actually manufacturing methamphetamine. That is, the seller of a contaminated property could merely argue that they were engaged in methamphetamine related activities, which resulted in methamphetamine contamination, but they were not actually engaged in “production.”

The ambiguity of the new Bill is such that it does not provide any protection to tenants moving into rental properties – but does protect investors who are purchasing rental properties.

Ultimately, the statute could actually help to hide former methlabs and contaminated properties and hinder the ability of the Colorado homebuyer to determine if a meth lab was present in their new dream home.

A copy of Colorado real estate disclosure statute is available by clicking here.

To return to our main methamphetamine discussion, click here. For a discussion on how to recognize the signs of a methlab click here.

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