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User: Jayne
Date: 11/18/2008 3:00 pm

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The EPA May be Visiting You and Bringing an $11,000 Fine

November 2008

What we all know, or should know:

Lead poses significant health risks, from behavioral problems and learning disabilities, to seizures and death. Children six years old and under are most at risk.

The EPA and HUD issued the "Lead-Based Paint Disclosure Rule," which requires the disclosure of known lead paint and lead-based paint hazards by persons selling or leasing a pre-1978 house. Specifically, the Rule requires:

Real estate agents/landlords/property managers/sellers to: (a) provide the EPA-approved lead pamphlet to purchasers/renters and (b) disclose known lead-based paint to potential purchasers/renters;

Sellers/landlords must include lead disclosure statements in the lease or sale agreement;

Sellers are required to provide 10-day opportunity for purchasers to conduct inspection or risk assessment.

Additionally, the Rule imposes certification and disclosure requirements by individuals who perform renovations and remodeling involving these structures.

What you may not know, but should:

Salvaging homes is big business, which is getting bigger with the movement toward "green" building and recycling. This is where REALTORÂ®S need to be vigilant.

New construction and homes built after 1978 may have pre-1978 "components" which would trigger the disclosure requirements. It is easy to see a construction date and not even think about lead paint. However, think about these scenarios: a new home with a "retro" kitchen including salvaged cabinets; the home with the built-in antique china hutch or historic staircase; the chic western, rugged decor home, complete with barn boards and stable doors.

You should be deciding if the Lead-Based Paint Disclosure must be used on a case-by-case, house-by-house, basis - ask questions of your Sellers to determine if there is any item that predates 1978.

We see Buyer's agents printing the Lead-Based Paint Disclosure form, and having the buyers sign it at the same time as making an offer. According to the EPA, if the Buyer signs the form before the Seller and the Seller's agent, the disclosure is ineffective. Another means of invalidating the Disclosure is if the form is not completed completely and properly.

At the NAR Convention, I listened to Brokers from Oregon, Arkansas and California, tell of the EPA auditing of their firms and being fined $11,000 per violation (the fines can range from a letter of reprimand/non-compliance to monetary fines of $110 to $11,000, per violation). One person reported of a large firm in New England being found to have 34 transactions with erroneously completed Disclosure forms, amounting to 102 individual violations - the amount of fines assessed was not known.

The most common violations were:

The Buyer signing the Disclosure prior to the Seller (or signing a blank document); and

The Seller using a ✔ (check-mark) instead of initialing where the form so indicated.

Should a habit develop in your office where the form is presented to the Buyer before everyone else has signed, or your agents do not require initials on each appropriate blank, the number of violations can be staggering. Thus, each office should adopt an Office Procedures Policy concerning the Lead-Based Paint Disclosure, and (MOST IMPORTANTLY) instruct your licensees to use the Disclosure form properly, and monitor/audit your own files to see that it is being done correctly.

What about those old out-buildings behind the new house?

The disclosure requirement extends to garages, tool sheds, other outbuildings, signs, fences, and mechanical equipment on the property, if these items are affixed to the residential portion of the property. The Lead Warning Statement required by the statute states that the purchaser is notified that the residential real property may present exposure to lead. Thus, disclosure of known lead-based paint or lead-based paint hazards associated with any items that are affixed to the property must be made. However, because the Disclosure Rule is limited to contracts for sale or lease of housing, the regulations apply only to those items that are located on that part of the real property that is used primarily for purposes associated with residential use. EPA and HUD consider garages for personal vehicles, storage sheds, play areas and play equipment, air conditioners, storage tanks for home fuel, yards, driveways, fences and signs to be examples of items that are associated with residential use, in addition to structures actually used by people as living quarters. For most urban and many suburban residential lots, the entire property is normally considered as being devoted to residential use. In the case of real property that is used for nonresidential as well as residential purposes, a judgment should be made as to which part of the property is used primarily for residential purposes.

How long should you keep the Disclosure documents?

The EPA recommends that the Disclosure forms be maintained for 7-10 years; however, HUD recommends the forms be kept forever. I recommend something in-between, based upon when you may need the Disclosures as evidence.
The need to be able to prove that a Lead-Based Paint Disclosures was provided arises when someone later claims an injury (such as birth defects or lead-poisoning) are used in defense of a REALTORÂ® who sold a property with lead-based paints which then caused health problems for the baby who resided in the home. In Montana, that "baby" plaintiff has 3 years from the date she reaches the age of adulthood before the statute of limitations would bar a claim for her injuries and damages. The age of majority is 18 in Montana, so hypothetically, you could have a claim arise 21 years after the lead exposure. Other factors could extend the statute of limitations even further, too, such as a late discovery of the cause of the health effects, disability of the plaintiff, etc.

I recommend a "better-safe-than-sorry" approach to records maintenance, especially since electronic record maintenance has become cost-effective and simple. Scan the documents after each closing, and maintain at least two (2) archive copies off-premises.

The NAR website has some very valuable resources for you. Visit www.realtor.org, Law & Policy section, and review the articles and guidelines concerning Lead-Based Paint Disclosure, in the "The Letter of the Law."

Hoping you use this information and pass it along to your colleagues and associates,

Tia R. Robbin
NMAR Legal Counsel
Measure, Robbin & Wilson
24 First Avenue East, Suite C
P.O. Box 918
Kalispell, MT 59903-0918
Phone: 406-752-6373
Fax: 406-752-7168
email: tia@measureandwilson.com

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--- (Edited on 11/18/2008 3:00 pm [GMT-0600] by Jayne) ---

Page Last Updated: November 18, 2008

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