Lead-Based Paint: A Harsh Reminder

In light of recent declines in the stock market, many investors have looked to real estate to provide a degree of stability to their portfolios. Those who have not invested in residential real estate in the past may not have had reason to take note of the Residential Lead-Based Paint Hazard Reduction Act of 1992. It's been ten years since Congress passed the Act and unless they regularly deal with older properties, even real estate professionals may forget about the Act's requirements. However, as one New Hampshire property manager recently discovered, the EPA is still vigorously enforcing the Act.

James T. Aneckstein of Manchester, New Hampshire, failed to provide the required disclosures regarding the hazards of lead-based paint to tenants of the apartment building he managed and then attempted to cover up that failure. The two-year old daughter of one of his tenants subsequently died from severe lead poisoning less than two months after occupying an apartment. On March 26, Mr. Aneckstein was sentenced to 15 months in federal prison. He and his company were ordered to pay a $40,000 fine.

This was the first criminal prosecution of a rental property manager for not providing lead hazard notices. Notably, he was not charged in connection with the child's death; the prison sentence and fine were imposed strictly on the basis of his failure to provide the proper warnings to his tenants.

What are the requirements of the 1992 Act with respect to owners, managers, landlords, brokers, and sellers? With respect to any residential property constructed before 1978 (when lead-based paint was banned), responsible parties must:

• Provide purchasers or tenants with an EPA-approved informational pamphlet on the dangers of lead paint. The standard EPA document is entitled "Protect Your Family From Lead in Your Home, EPA #747-K-94-001."
• Disclose any knowledge of the presence of lead paint or any lead paint hazard in the building.
• Disclose any additional information concerning the known lead paint or lead paint hazard, such as the basis for the determination of its existence, the location, and condition of the painted surfaces.
• Provide a list of any records or reports available relating to the lead paint or lead paint hazard, including reports regarding common areas and other residential dwellings in multi-family housing.
• Have purchasers or tenants sign an acknowledgment that they have received the information and keep those acknowledgments on file for three years.
• In the case of purchase and sale agreements, provide at least a 10-day inspection period to assess any risk of lead paint before a purchaser becomes obligated under the contract. This inspection may be waived, in writing, by the purchaser.

Although the Act applies to landlords and sellers of both single family and multi-family properties, it provides a few exemptions to the disclosure requirements, including:

• Properties acquired through foreclosure.
• Short-term leases of 100 days or less with no renewal or extension provisions.
• Renewals of leases where the lessor has previously disclosed any lead paint information and there is no new information.
• Purchase, sale, or servicing of mortgages.

Although the dangers of lead based paint may not be as widely known and publicized in the real estate industry as others such as asbestos or mold, the recent case in New Hampshire proves that the consequences of ignoring the Act can be devastating.
  

For further information on this topic, please contact Beth Tiggelaar at beth.tiggelaar@strasburger.com.

     
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