Anyone who knows me knows that I believe humor plays a big part in learning and that I attempt to insert humor as often as I can during educational moments and conversations. For instance, when discussing lead-based paint (LBP), two specific movies come to my mind that I often use to make the topic relatable: “Dodgeball: A True Underdog Story” — pay close attention to the narrator during the instructional video, and “Tommy Boy” — specifically the scene between Chris Farley and Rob Lowe at the gas station. I have come to find during my time of public speaking that if you can connect a memory with a teaching moment, people will hold onto the lesson. The juxtaposition of laughter and a legal topic often resonates with individuals as well.
However, while I may use humor to assist in connecting the dots during a discussion, LBP is no laughing matter. And after several discussions with brokers and agents on this topic, I have decided it’s time to once again revisit the importance of complying with the LBP disclosure law.
History of lead
In 1978, the federal government banned lead paint use in residential properties. According to the Environmental Protection Agency (EPA), lead from paint is the most common cause of lead poisoning. The two groups most vulnerable to the effects of lead poisoning are children under the age of six and pregnant women. Exposure to LBP in children may contribute to kidney damage and slowed body growth as well as neurological damage, which may include learning disabilities and behavioral problems. To learn more about the history of LBP and the health effects, go to the EPA’s website at www.epa.gov/lead.
Who must comply with the LBP disclosure law?
The federal LBP disclosure rules specifically require sellers and landlords of most residential housing built before 1978 — including FSBO and REO properties — to do the following:
- Disclose the presence of known LBP.
- Provide buyers and tenants with any available records or reports about any LBP present in the housing.
- Provide buyers and tenants with a federally approved lead hazard information pamphlet.
Offers to purchase and leases must contain certain disclosures and acknowledgments. Sellers must also provide buyers with an opportunity to inspect for LBP.
The federal LBP rules provide that each agent shall ensure compliance with all the requirements of the rules. "Agent" is defined as any party who enters into a contract with a seller for the purpose of selling target housing. This includes persons who enter into a contract with a representative of the seller, and excludes buyers and buyer representatives who receive all compensation from the buyer.
To reiterate, all agents must ensure compliance — this includes the listing agent and cooperating agents. The only agents exempt from the compliance requirements are buyer’s agents that are solely compensated by the buyer; meaning only the buyer is paying the buyer’s agent’s compensation. Therefore, if you are a buyer’s agent and you are receiving compensation from the listing agent or seller, then you are required to ensure compliance. This is not just a listing broker/agent’s “problem.”
To ensure compliance, an agent shall do the following:
- Inform the seller of his or her obligations under the federal LBP rules.
- Ensure that the seller has performed all activities required under the rules including disclosing information and providing applicable reports.
- Ensure that the seller gives buyers the opportunity for an LBP inspection.
- Ensure that all leases, rental agreements, offers to purchase and other sales contracts contain the appropriate warning statement, disclosure language, certifications and signatures.
Compliance
Simply stated, “compliance” is two-fold: providing a buyer with a disclosure document about LBP and providing the buyer with the EPA pamphlet, "Protect Your Family from Lead in Your Home."
The WRA's Addendum S has been developed for use to ensure compliance with the federal LBP disclosure law. This addendum serves as a self-contained summary of the federal LBP disclosure rules and as a checklist for compliance. If all of the steps stated in the addendum are completed — the addendum is filled in by the seller and signed by all parties and agents in the transaction, and the addendum is properly incorporated into the offer to purchase before acceptance — federal LBP disclosure compliance will be achieved.
Addendum S is used most effectively and offers the most liability protection for real estate agents when the sellers complete the form when a residential listing for target housing is taken. The prudent listing broker will review Addendum S information and explanations with the client and have the seller complete and sign the seller section of the Addendum S at the same time the RECR is completed. The listing agent can sign Addendum S, and then copies of the seller-completed RECR and Addendum S will be ready for distribution to cooperating brokers via the MLS or to buyers at a showing or open house, along with the EPA pamphlet.
The seller is required to indicate knowledge of LBP. If the seller has no knowledge or has not been provided any knowledge by a third party expert that disclosed LBP on the property then the seller would not be required to make any disclosures. However, if the seller has confirmed that there is LBP on the property, then the seller would be required to provide the buyer any paperwork the seller received. In addition, if the seller has professionally removed LBP from the property and has been provided a certificate stating that the property is lead-free, the seller would certainly want to share a copy of said certification.
Keep in mind that selling a pre-1978 home “as-is” does not exempt the seller from LBP disclosures; the seller is still obligated to comply with LBP disclosures no matter the age of the property.
What if the seller does not provide a disclosure?
If a seller has not provided an Addendum S, it is possible for a buyer to initiate an Addendum S. The buyer would indicate “none” in the disclosure section of the form. Before executing such a move, the cooperating agent could contact the listing agent to see if the seller has any disclosures to make or if there is a disclosure document that the seller now has available.
The buyer would complete and sign the form and submit it with the offer. The agent working with the buyer that is not being paid solely by the buyer may choose not to sign the Addendum S until the seller has made disclosures.
The seller and the listing agent then may choose to sign the Addendum S or may choose to reject the buyer’s offer and provide the buyer a completed Addendum S and then have the buyer submit a new offer to purchase.
Penalties
The civil penalties for each violation by an agent or owner shall be no more than $11,000 for violations occurring on or after July 28, 1997. In addition, a person may be subject to criminal misdemeanor sanctions if they knowingly or willfully violate the federal LBP law. Such sanctions could include imprisonment for not more than one year, and a fine of not more than $100,000 for each day of violation.
Again, to ensure LBP disclosure compliance, you need two items: the 3-page form (presuming you’re using WRA’s Addendum S) as well as the EPA brochure.
Resources
Cori Lamont is Director of Regulatory Affairs for the WRA.