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Real Estate Tall Buildings

Sep 01, 1996

Lead-Based Paint Alert: Joint EPA/HUD Rule Imposes New Disclosure Duties on Sellers and Landlords

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The Environmental Protection Agency ("EPA") and the Department of Housing and Urban Development ("HUD") have jointly issued regulations requiring sellers, lessors and brokers to provide purchasers and tenants with certain general and property ­specific information about lead­ based paint and lead­ based paint hazards prior to the sale or lease of residential properties.1 Lead has long been known to pose health hazards and to be particularly harmful to children, pregnant women and fetuses. According to the EPA, lead­based paint in the home is now the most common source of children's exposure to lead, through the ingestion of paint chips and the inhalation of lead dust. The EPA estimates that the rule, issued under the Residential Lead ­Based Hazard Act of 1992,2 may cost $75 million a year and add $6 to the cost of renting an apartment or buying a house.

Scope and Application

 

The rule becomes effective on September 6, 1996, for owners of more than four dwelling units and on December 6, 1996, for owners of four or fewer dwelling units. The rule applies only to certain "target housing" (including condos and co-­ops) constructed before 1978 when the Consumer Product Safety Commission banned the use of lead­ based paint. HUD estimates that approximately three­ quarters of the nation's pre­1978 housing units (approximately 64 million dwellings) contain lead ­based paint. The rule exempts "zero­ bedroom dwellings" such as lofts and studio apartments and housing for the elderly and the handicapped, provided that such housing will not be occupied by children under the age of six.

Seller and Lessor Responsibilities

All sales and leasing transactions involving target housing must comply with the following requirements:

(i) The seller/landlord must disclose actual knowledge of lead ­based paint and lead­ based paint hazards in the target housing and provide available reports to the buyer/tenant, including reports regarding common areas.
(ii) The seller/landlord must provide the buyer/tenant with an EPA­approved pamphlet on lead hazards entitled Protect Your Family From Lead in Your Home.
(iii) The sales contract or lease must contain certain warning language and disclosure and acknowledgement provisions verifying that all the requirements were satisfied. Sample forms are set forth in the rule. Records evidencing satisfaction of the disclosure requirements must be kept for three years.
(iv) In sale transactions, the seller must provide the purchaser with a 10­day period to conduct an inspection of the property at the purchaser's expense. The 10­day period may be adjusted or waived by mutual consent and commences at the time the purchaser signs a contract to purchase the target housing.

The rule's primary focus is on disclosure of known hazards; it does not require that the seller or landlord conduct or finance a lead inspection, nor does it require that a building owner or landlord test for lead ­based paint or remove lead ­paint discovered during an inspection. And although the above requirements must be satisfied prior to the parties' becoming obligated under the contract, the rule does not invalidate sales and leasing contracts that do not comply with the rule.

By its terms, the rule is inapplicable to the following:

Foreclosure sales
 
The purchase, sale or servicing of mortgages
Leases where the subject property has been found to be free of lead­ based paint by a certified inspector

Renewals of existing leases where the tenant has previously received the required lead­ based paint hazard information and no new information has come to the attention of the landlord

Leases of 100 days or less, such as vacation houses or short ­term rentals

Liability

 A seller, lessor, or agent who fails to give the proper information is subject to civil and criminal penalties of up to $30,000 per occurrence and one year in jail, as well as triple damages and attorneys fees in a private civil suit. Agents are not liable for hazards which were not made known to them by their principals.

This memorandum is intended only as a general discussion of these issues. It should not be regarded as legal advice. We would be pleased to provide additional details or advice about specific situations if desired. Please feel free to contact Margaret Murphy or Emily Conant of this Firm at (212) 848­4000.

 

Footnotes

1 61 Fed. Reg. 9064 (Mar. 6, 1996) (to be codified at 24 C.F.R. ' 35, 40 C.F.R. ' 745). "Lead­based paint" is defined as any surface coating that contains lead in excess of 1.0 milligrams per square centimeter, or 0.5 percent by weight, or as otherwise established by HUD. 42 U.S.C. ' 4851(b)(14). "Lead­based paint hazards" are defined as conditions that cause exposure to lead from lead­contaminated dust, lead­contaminated soil or lead­contaminated paint that is either deteriorated or present on accessible surfaces, friction surfaces or impact surfaces, resulting in adverse human health effects as established by the appropriate federal agency. 42 U.S.C. ' 4851(b)(15).

2 42 U.S.C. ' 4852(d).

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