Published: Summer 1996

SEMINAR EXAMINES LEAD PAINT HAZARD DISCLOSURE RULES

The Federal Residential Lead-Based Paint Hazard Reduction Act imposes additional requirements on the procedure for selling and renting houses and apartments in all buildings built prior to 1978. Owners are required to disclose to prospective purchasers all known information about lead-based paint in their units and in the public areas of the building, to include in their contracts a lead-warning statement required by EPA, and to give purchasers an EPA lead information pamphlet (available at no cost from the EPA and also on CNYC's Internet homepage at http://www.cnyc.coop). They must also allow the purchaser 10 days to have the apartment inspected for lead-based paint; within that 10-day period, purchasers dissatisfied with the lead-based paint assessment results may cancel their contracts of sale and receive refunds of any deposits. Transactions concerning studio apartments or other apartments without bedrooms are exempt from the disclosure requirement, as are leases for less than 100 days.

September 6, 1996, is the compliance date for sales or leases by owners of more than four apartments, and December 6, 1996, is the date by which owners of individual units who sell or sublease must comply. Both the seller and the cooperative or condominium in which the unit is located are obligated to provide this disclosure, and the obligations run concurrently. Therefore, beginning September 6, 1996, buildings in which there are sponsors who own more than four units should have been providing disclosure information about the building and verifying that the sponsor has disclosed lead-based paint information about the unit offered for sale or rent.

"My rule is that you can't disclose too much, only too little," stated Marc J. Luxemburg, Esq., president of the Council of New York Cooperatives & Condominiums, as he introduced an intensive two-hour seminar on September 11, 1996, focusing on the disclosure regulations. A rapt audience of board members, building managers, attorneys and lead-control professionals peppered him with challenging questions on many aspects of compliance. They were pleased with the packet of CNYC-suggested prototype documents that Mr. Luxemburg distributed.

He stressed that these regulations are strictly concerned with disclosure. There is no requirement either to perform physical tests for lead-based paint or to remove or abate any lead-based paint, hazardous or not. Most states and municipalities have additional requirements relating to the control of lead-based paint, and New York is one of these.

Mr. Luxemburg advised every building in New York City built prior to 1960, and before 1978 elsewhere, to assume that there is lead-based paint in the building and to so disclose. He further advised that the board conduct a good-faith effort to compile all available information about construction projects and tests that may have occurred that would have significance for lead paint disclosure. This could include the records maintained by present or former board members, the superintendent or the managing agent, the sponsor, shareholders or former shareholders, or engineers, architects and contractors, or environmental studies made for banks or insurance carriers.

If, for example, the building or any part of it had been completely renovated subsequent to 1978, with walls removed and replaced, etc., the affected area could be presumed to be free of lead-based paint. The replacement of windows subsequent to 1978 is very significant, as lead hazards exist primarily where friction surfaces -- windows, doors, etc. -- cause paint to flake or chip, or paint dust to be freed into the air. This information should be organized in a document that is concise and readable.

The cooperative or condominium should alert all owners that additional procedures will now be necessary when units are sold or leased. Mr. Luxemburg suggested that each board decide whether it will require disclosure prior to the contract of sale or after its execution. This decision will determine when the building's disclosure document is to be presented to the prospective purchaser or lessee. To protect itself from any liability, the board should require the seller and purchaser to each acknowledge that lead-based paint disclosure has been made. It should also require that the seller indemnify the cooperative or condominium and its agents and representatives, including the transfer agent, against claims for failure to have complied with the federal lead-based paint disclosure requirements.

Many insurance policies now specifically exclude from coverage any liability for lead paint hazards. Still others will be silent on the issue, but will deny coverage if you are sued on a lead hazard issue on the grounds that it is automatically excluded as an environmental issue. Mr. Luxemburg advised participants to make thorough inquiry about lead liability coverage when next renewing their insurance policies. Check on the track record of your particular carrier with lead liability cases. This should provide a good indication of future conduct. Finally, there are some carriers that sell independent lead liability policies.

Both the Environmental Protection Administration (EPA), which can impose criminal penalties for violations, and the Department of Housing and Urban Development (HUD), which can impose civil penalties, have jurisdiction over the Residential Lead-Based Paint Hazard Reduction Act.

Because the sale of lead-based paint was outlawed in New York in 1960, requests have been made to move the target date for disclosure to 1960, but no action has yet been taken. In addition, neither the law nor the regulations addresses special situations caused by the double layer of ownership in New York city cooperatives and condominiums. CNYC is in regular contact with both the EPA and HUD on clarifying many of these questions. As soon as any modifications are made, CNYC will quickly notify its members.