The Law & You: Lead Paint Crackdown Targets Real Estate Industry

A broker told me recently that she worries every Monday morning when she reviews the weekend’s sales, because offers are being made and accepted without proper lead-based paint disclosure. She should worry.

The Environmental Protection Agency and the U.S. Department of Housing and Urban Development have initiated at least 65 enforcement actions nationwide this year, stepping up pressure against anyone who fails to disclose residential lead-based paint to prospective tenants and buyers.

Many of these actions against landlords, property managers, and real estate practitioners--the first ever filed under the Residential Lead-Based Paint Hazard Reduction Act of 1992--have imposed substantial penalties.

In one recent court action, four Washington, D.C., landlords agreed to spend more than $1 million to remove lead-based paint hazards from 31 apartment buildings, pay $87,000 in penalties, and contribute $172,000 to child health programs.

But don’t think you’re off the hook because you don’t work with large multifamily residences. The EPA also recently brought complaints against the real estate practitioners on both sides of an Indiana transaction in which a home was sold without the proper disclosures and children were exposed to lead. The EPA set penalties of $36,300 against the seller’s salesperson and broker and $29,700 against the buyer’s salesperson and broker.

According to the EPA, about 900,000 U.S. preschoolers suffer from high lead levels, which can cause lowered IQ, hearing loss, stunted growth, and learning and behavioral problems. Children and pregnant women are most susceptible to lead poisoning.

Penalties for violating the disclosure law are based in part on the seriousness of the offense. A nonegregious offense is a single incidence of noncompliance that does not pose a significant risk, such as renting an apartment or selling a home to a 35-year-old single man without making proper disclosures. In this case, the EPA would most likely put the offenders on notice.

An egregious offense is a single incidence of noncompliance that does pose a significant risk, such as renting or selling to a pregnant woman or someone with young children without making proper disclosures. In this case, the EPA would be likely to file a civil complaint and institute a monetary penalty.

Fortunately, compliance is within your control. Simply make sure you understand and take seriously the Residential Lead-Based Paint Hazard Reduction Act, which requires sellers and lessors of pre-1978 residential dwellings to

• Disclose the presence of known lead-based paint and lead-based paint hazards in writing
• Provide buyers and lessees with copies of any records pertaining to the presence of lead-based paint and lead-based paint hazards
• Provide buyers and lessees with a federally approved pamphlet (For copies, call the EPA at 800/424-LEAD or visit www.epa.gov/lead.)
• Give buyers up to 10 days to conduct an inspection
• Include in sales and lease contracts specific, federally mandated disclosure language

Real estate brokers should be especially vigilant, since they can be held liable for the actions of their salespeople. Brokers should institute office policies mandating that no offer may be accepted on one of the company’s listings until proper disclosure has been made to the buyer. If a buyer wants to make an offer on another office’s listing and no disclosure has been made, the offer should be expressly conditioned on the buyer’s receiving a completed disclosure form. Further, the offer should state that the buyer isn’t obligated to purchase the property until the form is received and accepted. Brokers and property managers should also consider conducting an internal audit to be sure their policies are being followed.

Compliance is not difficult. Be smart, and you’ll be able to comply with the law and protect yourself, clients, and customers without slowing down transactions.