OREC on Lead Paint

FROM THE OKLAHOMA REAL ESTATE COMMISSION

LEAD-BASED PAINT REGULATIONS ARE EFFECTIVE - ENFORCEMENT BEGINS SEPTEMBER 6, 1996

Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992 commonly referred to as Title X of Public Law 102-550) to address the need to control exposure to lead-based paint hazards on "target housing." The portion of statutory law applying to real estate notification and disclosure appears in United States Code 42. Section 4852 (d.) Section 1018 of Title X required EPA and HUD to promulgate joint regulations (rules) for disclosure of any known lead-based paint or any known lead-based paint hazards in "target housing" offered for sale or lease.

"Target housing" is defined as any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than 6 years of age resides or is expected to reside in such housing) or any 0-bedroom dwelling.

HUD and the EPA released lead-based paint regulations on March 6, 1996, but delayed enforcement to allow the public time to become familiar with the rule requirements and to set up procedures for compliance. Enforcement of the rules will begin September 6, 1996, for owners of more than tour dwelling units and December 6, 1996, for owners of one to four units.

The following activities shall be completed before the purchaser or lessee is obligated under any contract to purchase or lease "target housing" that is not otherwise an exempt transaction. Nothing implies a positive obligation on the seller or lessor to conduct an inspection, risk assessment or abatement activity. It is encumbent upon the buyer or lessee to have the property tested if he or she so desires. However, the seller or lessor is required to comply with the following disclosure requirements:

(1) Sellers and lessors shall provide purchasers and lessees with an EPA approved lead hazard information pamphlet entitled "Protect Your Family from Lead in Your Home";
(2) Sellers and lessors shall disclose to purchasers, lessees and real estate agents the presence of known lead-based paint and/or lead-based paint hazards in target housing being sold or leased. Sellers or lessors shall also disclose any additional in-formation available concerning known lead-based paint and/or hazards, such as the basis for the determination that lead-based paint and/or lead-based paint hazards exist, the location of the lead-based paint and/or hazards, and the condition of the painted surfaces;
(3) Sellers and lessors shall provide purchasers or lessees with any records or reports "available" to the seller or lessor pertaining to lead-based paint and/or lead-based paint hazards in the target housing being sold or leased. This requirement includes records and reports regarding common areas. This requirement also includes records and reports regarding other residential dwellings in multifamily target housing, provided that such information is part of an evaluation or reduction of lead-based paint and/or lead-based paint hazards in the target housing as a whole.
(4) Sellers shall permit the purchaser with a 10-day period (unless the parties mutually agree, in writing, upon a different period of time) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards before the purchaser is obligated under any purchase contract. However, a purchaser may waive the opportunity to conduct the risk assessment or inspection by so indicating in writing;
(5) Sales contracts must include an attachment which contains certain disclosure and acknowledgment language; Leasing contracts must include certain disclosure and acknowledgment language or an attachment which contains such information and acknowledgment; and
(6) Real estate agents must ensure compliance with these requirements.

Agent Defined-Responsibilities

Agent Defined EPA and HUD refer to a real estate licensee as an "agent" which they define as "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 term does not apply to purchasers or any purchaser's representative who receives all compensation from the purchaser."

Therefore an agent entering into a contractual relationship directly with the seller or lessor (or indirectly with a representative of the seller or lessor) for the purpose of selling or leasing target housing is an "agent" for the purposes of this rule. As a consequence, listing agents selling agents and buyer agents (if paid by the seller or through a cooperative brokerage agreement with the listing agent) are 'agents' and are responsible for ensuring compliance under the rule.

Since the roles refer only to agents having entered into a contract with the seller or lessor, buyer's agents paid entirely by the purchaser are not considered "agents" under this rule and therefore are not responsible for ensuring compliance.

Agent's Responsibilities - Title X specifically addresses the responsibilities of agents, requiring them to ensure compliance with the provisions of the law. Agents fulfill this requirement by informing sellers or lessors of their obligations and by making sure that these activities are completed either by the seller or lessor or by the agent personally. Sellers have a duty to disclose to the agent any known lead-based paint and/or lead-based paint hazards on the property. Provided that the agent has actually informed the seller or lessor of his/her obligation, the rule states that the agent will not be responsible for information withheld from the agent by the seller or lessor.

Disclosure Form

There is no federally mandated form; however, a sample copy which contains all required elements is included in this material which can be photocopied for your immediate use.

Timing of Disclosure-Residential Sales
Each contract to sell target housing shall include an attachment (disclosure form) containing specific disclosure and acknowledgment elements, in the language of the contract. The disclosure form must be acknowledged by all parties, i.e., seller, purchaser and real estate agent.
The disclosure and notification requirement for a residential sale must take place before the purchaser is obligated. This requires the seller to disclose information before accepting the purchaser's offer, thereby allowing the purchaser an opportunity t() review the information and to possibly amend the offer. If a seller were to accept a purchaser's offer and obligate the purchaser before disclosing known information, such a seller would he in violation.

Timing of Disclosure -Leasing Transactions
Each contract to lease target housing must include specific disclosures and elements as an attachment (disclosure form) or incorporated within the contract, in the language of the contract. The disclosure information must be acknowledged by all parties, ie, lessor, lessee and real estate agent. In leasing transactions, the lessor must provide the information and complete the disclosure portions of the lease (or attachment) before the lessee becomes obligated under a contract to lease the housing.

Risk Assessment or Inspection
Sellers shall provide purchasers with a l0-day opportunity to conduct a risk assessment or inspection before becoming obligated under a purchase contract. The length of time may he shortened or lengthened by mutual agreement. Some purchasers may choose to waive the opportunity for a risk assessment or inspection. Purchasers may he especially inclined to waive the opportunity in cases where the seller provides significant amount of relevant information on the property during the disclosure process, or in cases where no children are expected to reside in the housing.

If the purchaser chooses to waive the evaluation opportunity. the purchaser is still obligated to acknowledge receipt of the evaluation opportunity, the attachment. documenting this voluntary decision to waive the opportunity. EPA and HUD expect that in most cases where the purchaser chooses to exercise his or her evaluation opportunity. the parties will develop and incorporate into the contract mutually agreeable terms for the conduct and completion of the evaluation opportunity.

Record-keeping Requirements

The seller. and any agent, shall retain a copy of the completed disclosure attachment for three (3) years ~ from the completion date of the sale. The lessor. and any agent, shall retain a copy of the completed disclosure attachment or lease contract containing the required disclosure information for three (3) years from the commencement of the leasing period.

While there is no mandated retention requirement set in this rule on a seller's or lessor's lead-based paint and/or hazards reports and records pertaining to the property. EPA and HUD have defined the word "available" which relates to disclosure of information contained in such reports and records. "Available" has been defined as meaning "records and reports in the seller's or lessor's possession or reasonably obtainable by the seller or lessor at the time of disclosure." EPA and HUD encourages sellers and lessors to retain relevant records in anticipation of a future sale or lease. The requirement to disclose the presence of known lead-based paint and/or lead-based paint hazards remains even if the seller or lessor is unable to locate the original reports quantifying the data.

Penalties for Failure to Comply Violators may be subject to criminal and/or civil penalties. Penal-ties for each violation shall not be more than $10,000.00 for each violation. Further, any person who knowingly violates the provisions shall be jointly and severally liable to the purchaser or lessee in an amount equal to three (3) times the amount of damages incurred by such individual.

Title X also authorizes the court to) award Court Costs. reasonable attorney fees. and expert witness fees to a prevailing plaintiff. The seller, lessor, or agent shall not he responsible for the failure of a purchaser's or lessee's legal representative (where such representative receives all compensation from the purchaser or lessee) to transmit disclosure materials to the purchaser or lessee, provided that all required parties have completed and signed the necessary certification and acknowledgment language that is required to appear on the disclosure forms.

Status of Contract if Disclosure Does Not Occur
Section 1018 (c) provides that nothing in Section 1018 (or its implementing rules) shall 'affect the validity or enforceability of any sale or contract for the purchase and sale or lease of any interest in residential real property or any loan. loan agreement. mortgage. or lien made or arising in Connection with a mortgage loan" and states that nothing in Section 1018 or its implementing rules "shall create a defect in title."
The provisions of Section 1018 cannot void or nullify the contract after ratification and cannot void any transfer of real estate, even if it can be proven that the seller or lessor violated Section 1018 provisions. In such circumstances. purchasers seeking remedy for the non-disclosure may avail themselves of the civil remedies afforded by Section 11)18 of Title X.

Types of Transactions Included and Excluded Section 1018 mandated that the rule apply to sales and leases of target housing. However, the following are excluded from the statutory definition of target housing:
1. Houses built after 1977.
2. Housing for the elderly unless any child who is less than 6 years of age resides or is expected to reside in such housing.
Housing for the elderly means retirement communities or similar types of housing reserved for households composed of one or more persons 62 years of age or more at the time of initial occupancy.

3. Housing for the disabled unless any child who is less than 6 years of age resides or is expected to reside in such housing.
4. Transactions to sell properties at foreclosure-excluded.

EPA and HUD believe that the circumstances typically surround-toe foreclosure transactions make pre-sale disclosure and evaluation unworkable and impractical. Access to properties during foreclosure proceedings is often limited. making evaluations impossible. Further, these transactions do not necessarily involve direct interaction between the property owner and the purchaser, and the mortgage holder or trustee is unlikely to have information on the presence of lead-based paint and/or lead-based paint hazards. This exclusion does not apply to the sale of housing originally acquired through a foreclosure sale and subsequently resold.
5. Rental housing found to be free of lead-based paint --excluded. The final role exempts from Coverage leasing transactions involving target housing that is free of lead-based paint, as determined by a certified inspector. Oklahoma currently does not have a State certification program for inspectors. However. Department of Environmental Quality is in the process of submitting emergency rules in hopes of having a program available sometime in 0october.
For the purposes of this rule. EPA and HUD have defined "lead-based paint free" as the absence of paint with lead levels above those provided in Title X. Given the value that lead-safe housing would have to an informed consumer. EPA and HUD expect that owners will see a great benefit in informing lessees of the housing's lead-based paint free status.
6. Short-term leases of 100 days or less-excluded.
The final rule excludes housing transactions involving leasing agreements of 100 days or less, where no lease renewal or extension can occur. This short-term lease exclusion captures most seasonal vacation rentals and hotel and motel transactions, as well as other forms of short-term lodging. Therefore. notification requirements would apply to vacation rentals in cases where the stay extends beyond a 100-day period. Under such circumstances. EPA and HUD believe that the potential for occupant exposure to lead-based paint and/or lead-based paint hazards merits the disclosure of information required by the rule. regardless of whether the stated purpose of the lease is temporary or permanent housing.
In addition. EPA and HUD have placed a limitation on extensions and renewals of such short-term leases to insure that month-to-month leasing transactions remain covered.
7. Lease Renewals -- excluded if prior disclosure given.
The final rule does not require repeated disclosure during the renewal of existing leases in which the lessor has previously disclosed all required information and where no new information has come into the possession of the lessor.
8. The purchase, sale, or servicing of mortgages-excluded. The final rule does not cover, and was never intended to cover, the purchase. sale, or servicing of mortgages.
9. The sale or lease of 0-bedroom dwellings -- excluded. The final rule does not apply to transactions involving 0-bedroom dwellings. "0-bedroom dwelling" means any residential dwelling in which the living area is not separated from the sleeping area. Such term includes efficiencies, studio apartments, dormitory housing. military barracks. and rentals of individual rooms to residential dwellings.
10. Informal rental agreements - included. EPA and HUD have removed any implied exclusion for oral leases. Although the absence of a written lease provides challenges for certain Federal enforcement and compliance monitoring approaches. EPA and HUD believe that enforcement is possible.

Certified Inspectors and Risk Assessors

Currently Oklahoma does not have a State-approved certification pro-cram for inspectors. The Department of Environmental Quality (DEQ) is working towards implementing a certification program for inspectors and risk assessors in the near future. DEQ has proposed emergency rules and if approved could have an effective date as early as October 1, 1996.