Lead Paint Regulations: What Attorneys Must Know
Editor's Note: This is a reprint of an article from the June/July 1996 ATG concept.
The new lead paint regulations pose many questions, but provide few clear answers. Some issues are as follows:
Attorney’s Responsibility:
The regulations provide that any “agent” who acted on behalf of the seller or lessor can be sued. Agent means “any party who enters into a contract with a seller or lessor, including any party who enters into a contract with a representative of the seller or lessor, for the purpose of selling or leasing target housing.” This definition is meant to cover real estate brokers contracting directly or indirectly with the seller or lessor, but may be broad enough to cover attorneys acting as brokers or representing a seller or lessor in a residential real estate transaction. A broker or attorney acting as an agent must inform sellers and lessors of what the regulations require and must “ensure” compliance, except that agents will not be liable for a failure to disclose information that was not disclosed to them
How do you recognize the situation in which you become responsible? Attorneys may wish to have their real estate clients sign additional waivers and acknowledgments to verify that disclosure has been accomplished.
Timing of Disclosure:
The regulations provide that the seller or lessor shall make the required disclosures “before the purchaser or lessee is obligated under any contract to purchase or lease the housing.” To give the parties flexibility and accommodate local requirements and custom, the regulations identify only the latest point at which full disclosure must occur. Sellers and lessors do not have to provide mass disclosure to all possible purchasers and potential lessees, regardless of their degree of interest in the property. The regulations require only that the disclosure and acknowledgment information be included in the final contract or lease. For leasing transactions, disclosure should be automatic because the disclosure information will be included in or attached to the lease. For sales transactions, problems may arise when a purchaser takes the first step in formalizing the sales contract by submitting a written offer. If the seller accepts the offer without incorporating the disclosure and acknowledgment into the sales contract, the seller will be in violation of the regulations because the sellers obligated the purchaser before making disclosure. In this kind of transaction, the seller should be sure to include the disclosure and acknowledgment information as part of the negotiations.
Damages and Penalties:
The regulations provide that, “any person who knowingly violates [the regulations] shall be jointly and severally liable to the purchaser or lessee in an amount equal to three (3) times the damages incurred by such individual.” While the regulations refer only to suits by the “purchaser or lessee,” children who suffer from lead poisoning may be able to sue under the regulations, even if the seller or lessor did not know about them, because children are the intended beneficiaries of the regulations. Also, the regulations do not appear to limit damages to physical harm sustained from lead paint in the home.
Thus, damages may include the costs of mitigating lead-based paint hazards or a loss in marketability from the presence of lead paint. Finally, sellers, lessors, and agents face civil and criminal penalties of up to $10,000 per violation. The preamble to the regulations suggests that only “willful and repeat offenders” will be penalized and that a warning will be given before a fine is imposed.
Pamphlets:
The regulations allow states to develop their own lead hazard information pamphlet to be used in lieu of the EPA pamphlet, but the state pamphlets must have the authorization and approval of the EPA. As of this writing, Illinois has not developed its own lead pamphlet. A limited number of copies of the approved EPA pamphlet are available from ATG by calling our Order Department at (800) 252-0402, ext. 114. We hope to have large quantities available in the near future, which we would sell to our members. There are not restrictions on reproducing and duplicating the pamphlet for use in complying with the lead paint disclosure requirements. More information on pamphlet availability as it becomes available to us.
LEAD PAINT HAZARDS
Although the sale of lead-based paint has been banned nationwide since 1978, lead poisoning from peeling or chipping lead-based paint is still said to be one of the greatest threats to the health of children in the United States. The long-term effects of elevated levels of lead in a child may include learning disabilities, decreased growth, hyperactivity, impaired hearing, and even brain damage. In addition, recent studies have linked high lead levels to hypertension and other health disorders in adults and to abnormal fetal development in pregnant women.
The Environmental Protection Agency (EPA) estimates that significant levels of lead remain in the approximately 57 million homes built before 1980. The Cook County Department of Public Health estimates that at least 75 percent of residences in Illinois contain some lead-based paint. Concern over the potential hazards presented by lead-based paint has prompted both the federal and state governments to take action with new regulations that will change the way most people will own, buy, sell, and rent their homes.
Federal Regulations:
In October 1992, Congress enacted the Residential Lead-Based Paint Hazard Reduction Act. The Act requires that U.S. Department of Housing and Urban Development (HUD) and the EPA to enact regulations to reduce the incidence of childhood lead poisoning. In 1994, HUD and the EPA proposed new regulations on the disclosure of lead-based paint hazards that will affect about two-thirds of the nation’s housing, which will go into effect this year: September 6 for owners of more than four dwelling units, and December 6 for all other owners.
The Purpose of the regulations is to ensure that families are aware of the hazards of exposure to lead-based paint and ways to avoid such exposure before becoming obligated to purchase or lease housing that may contain lead-based paint. The regulations accomplish this purpose by requiring new duties of disclosure for sellers and lessors of older residential housing while giving prospective purchasers and tenants new ways to deal with lead-based paint hazards. The EPA estimates that the new regulations will help inform about nine million (9,000,000) renters and three million (3,000,000) home buyers each year.
Under the regulations, sellers and lessors of “target housing” must attach a standard disclosure and acknowledgment form to all sales contracts and leases stating whether they are aware of any lead-based paint hazards. The regulations do not require sellers and lessors to undertake any testing or removal of lead-based paint. Sellers and lessors must also provide an EPA pamphlet entitled “Protect Your Family from Lead in Your Home” before completing the contract or lease. Buyers, but not renters, will have ten (10) days to conduct, at their own expense, an inspection or risk assessment for the presence of lead-based paint before they will be obligated under a purchase contract. Estimated costs for learning about the requirements, obtaining the EPA pamphlet and other materials, and conducting disclosure activities comes to about $6 per transaction.
“Target housing” includes most residential housing built before 1978. The regulations do not cover housing built after 1978 because the government’s ban on the use of lead-based paint for residential housing took effect that year. The regulations also provide exemptions for “zero-bedroom dwellings,” such as efficiencies, lofts, and dormitories, as well as housing for the elderly and handicapped, unless children live there. Certain transactions are also exempt from coverage, including leases for less than 100 days or less where no renewal or extension can occur (such as vacation homes and short term rentals), renewals of existing leases where the lessor has previously met the disclosure requirements and does not have any new information, and sales of pre-1978 residential housing and foreclosure.
Sellers, lessors, and real estate agents and brokers share responsibility for ensuring compliance with the regulations. A party found to be in violation will be subject to federal civil and criminal penalties of up to $10,000 per violation and triple damages to a purchaser or tenant who brings a successful private suit for damages from lead-based paint in the residence. A court can also award attorney fees, expert witness fees, and costs.
State Regulations:
Illinois already has disclosure requirements covering both sales and leasing transactions. Concerns about lead-based paint prompted the Illinois Department of Public Health to adopt the Lead Poising Prevention Code in 1993. While it focuses on the potential health risks to children, the Code also contains some new regulations that are important for owners of residential housing containing lead-based paint.
The Code requires that children between the ages of six (6) months and six (6) years be screened for lead poising before being admitted to daycare centers, public schools, and other similar facilities. Once blood-lead levels above a certain standard are confirmed, the department has the authority to inspect the child’s residence and take samples for testing. If the department determines the lead-based paint to be hazardous because of peeling, chipping, flaking, or powdering, the owner of the residence must submit a mitigation plan for the department’s approval, and carry out the plan within 30 to 90 days. If any lead-based paint is found, even if it is in good condition and not hazardous, the owner must inform any current or prospective tenants and provide them with an information pamphlet.
Mitigation does not necessarily require removal of the lead-based paint, but it does mean implementing some kind of permanent solution for the hazard. All work must be approved by licensed inspectors, and contractors and works must follow strict safety rules, Contractors who remove the paint must test the waste to determine whether it must be disposed of as a hazardous waste or as a non-hazardous special waste.
An owner’s failure to provide current and prospective tenants with a brochure and notices of mitigation may amount to a Class A misdemeanor. In addition, rent may be withheld and reallocated to tenants to mitigate lead-based paint hazards. In the city of Chicago, a building owner may also be liable for the medical costs and damages suffered by children poisoned by lead-based paint.
Conclusion:
The new federal and state regulations provide a means for buyers and tenants to learn about lead-based paint hazards, as well as guidance for sellers and lessors in dealing with potential liability from lead-based paint hazards on their property. While lead-based paint may present a serious health hazard to children, this hazard exists only if the paint is peeling, chipping, or cracking. The new regulations make clear that the presence of lead-based paint should not prompt an owner to undertake a full-scale abatement project. The improper removal of lead-based paint may create a greater health hazard than leaving the paint in place and ensuring that it remains in good condition. Copies of the new federal regulations and related background materials can be obtained through the National Lead Information Clearinghouse at 1-800-424-LEAD.
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