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Announcement

Proposed New Requirements for Disclosure of Lead Paint

Winter 1995

The Environmental Protection Agency (EPA) and The Department of Housing and Urban Development (HUD) have proposed a rule regarding disclosure of lead paint concerns during residential real estate transactions.

The proposed rule implements the Residential Lead-Based Paint Reduction Act of 1992 and will require disclosure and inspections of residential properties during sales.

The rule applies to virtually all transactions involving a written contract to sell or lease "target housing." "Target housing" includes housing constructed prior to 1978, with very limited exceptions. Also, based on EPA’s interpretation of congressional intent, the rule was intended to cover housing designed for long term or continuous use. Lodging and other temporary accommodations will not be covered.

Certain transactions will also be exempted including foreclosure sales, informal (i.e., unwritten) rental agreements, and renewals of existing leases. However, in the case of a lender who purchases a foreclosed property and subsequently sells that property to a third party, the provisions of the rule will apply.

The rule requires disclosure by the Seller or Lessor, individually or through their agent, of any lead paint or lead based paint hazards known to the Seller. Disclosure is accomplished by providing "information" such as "inspection records and reports," "risk assessments records and reports," and any reports of past "abatement activities," as well as by completion of disclosure forms and a "lead warning statement" that will be attached to sale or lease agreements. In the case of multi-unit dwellings, required disclosure may include information on "common areas" within the dwelling as well as problems or concerns in other units. Sellers must also supply a lead information pamphlet being developed by EPA.

Beyond these disclosure requirements, Sellers, but not Lessors, must allow for a 10-calendar-day-inspection period prior to obligations under a residential purchase agreement taking effect. During this inspection period, Buyers may conduct a risk assessment or inspection for lead based hazards. In the case of most federally owned, insured, or assisted housing, a risk assessment will be mandatory. The proposal seeks comments on whether this 10 day period should be mandatory.

Of interest to real estate professionals are the obligations of "Agents" under the proposed rule. The definition of "Agent," under the rule, covers any party who enters into a contract with a Seller or Lessor to sell or lease residential housing. The "Agent" must "ensure compliance with the requirements of [the rule]" and is liable for penalties if violations occur. Differences in state law, with respect to real estate and agency, caused EPA to broadly define "Agent" in an effort to impose liability on whichever party would be liable under such a contract within a particular state (i.e., real estate broker, vicariously, or independent contract agent).

The proposed rule is an "unprecedented" involvement of federal agencies in such transactions. The final rule may take effect as early as October, 1995.

Media Contact 

If you have a media request or need an attorney with particular knowledge for comment, please contact Susan Steberl, Director of Marketing, at 414.287.9556 or ssteberl@gklaw.com.

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