Property Owners and Agents Beware: HUD Launches Aggressive Lead-Based Enforcement Initiatives
September 1, 1999
Amy L. Edwards- Washington
Steven Gordon - Washington
James Rodio - Northern Virginia
The Department of Housing and Urban Development (HUD) and the Environmental
Protection Agency (EPA), working in conjunction with the Department of Justice
(DOJ), have initiated an aggressive, nationwide effort to enforce the disclosure
requirements of the Residential Lead-Based Paint Hazard Reduction Act (the Act).
This enforcement initiative targets sellers, lessors and property managers of
residential housing built prior to 1978. HUD, in particular, is seeking hefty
fines and other costly remedies from those who have not met all of the technical
requirements of this complicated Act.
On July 15, 1999, Attorney General Janet Reno and HUD Secretary Andrew Cuomo
announced "multiple court actions of more than $1 million" and 45
administrative actions in 20 cities and four settlements requiring owners of
"target housing" to spend more than $1 million in lead-based paint
abatement and $259,000 in fines and other substitute damages. The EPA had
earlier announced its issuance of civil complaints against landlords in Missouri
and Kansas with proposed penalties of $56,200, and its commencement of four
civil lawsuits in Pennsylvania, Texas and Oklahoma alleging disclosure
violations and seeking penalties totaling $439,725. HUD has also sought
injunctive relief against alleged violators of the disclosure requirements.
The Act imposes a number of requirements on owners, lessors and agents, to
(1) provide purchasers or lessees an EPA-approved lead hazard information
pamphlet; (2) disclose to purchasers or lessees the presence of any known
lead-based paint or lead-based paint hazards or inform them that none is known;
(3) permit purchasers a 10-day period to conduct a lead-based paint risk
assessment or inspection prior to any contract obligation. The Act does not,
however, require owners or property managers to test for lead-based paint or to
abate it where it is known to exist (unless there is a hazard to human health).
The disclosure requirements became effective in September of 1996 and apply to
all residential housing built prior to 1978, with certain exceptions.
Unfortunately, the applicable disclosure requirements are often difficult to
find, understand and follow because they are contained not only in the Act,
itself, but also in scattered regulations and multiple guidance documents,
directives and enforcement policies issued by HUD and EPA. Portions of the
agency requirements may not even be legally binding, but HUD is treating its
directives and guidance as if they have the force of law.
In the enforcement actions brought to date, housing providers and their
agents have been cited for the following types of deficiencies:
- failure to provide disclosure notifications to purchasers before the sale
or to new tenants before the lease is signed
- failure to provide disclosure notifications to existing tenants where the
lease is renewed or there is a change in the terms and conditions of the lease
(e.g., change in the tenancy from annual to month-to-month; automatic rent
increase)
- failure to obtain initials or signature dates on the disclosure forms
- failure to provide tenants with existing reports relating to lead-based
paint in the building
- failure to obtain the certification of the leasing agent that it has
informed the owner of the owner's obligations to make the lead-based paint
disclosures to tenants
A violation of the Act can result in a civil money penalty of up to $11,000,
and HUD has taken the position that there can be as many as 11 distinct
violations in a single sale or leasing transaction. Further, both the owner and
the managing agent may be penalized separately for the same alleged disclosure
violations.
HUD and EPA are jointly responsible for enforcing the Act, and the two
agencies have jointly issued enforcement regulations and policies. Their
announced position is to provide compliance assistance to first-time violators
and to issue warnings (without penalty) to let parties know that they are out of
compliance and to give them an opportunity to come into compliance. However,
there has been a marked disparity in the actual approaches of the two agencies.
At a recent public forum, EPA reported that it has issued approximately 500
Notices of Non-Compliance to first-time violators, whereas HUD reported that it
has issued none. Instead, HUD and DOJ have been sending threatening letters to
housing providers, demanding hundreds of thousands of dollars in penalties and
fines, as well as "voluntary" inspections and abatement of all
lead-based paint in the building, as well as "voluntary" community
assistance programs (such as lead screening programs). These types of penalties
and "corrective actions" have been sought against reputable sellers,
lessors and agents, who would promptly comply with the Act if simply given a
warning and some guidance about what is required. Many of these owners and
agents have agreed to costly settlements with HUD rather than contest the
matter.
Holland & Knight attorneys are currently representing property owners and
managers in pending lead-based paint enforcement actions. They can assist other
owners and managers in achieving compliance with the Act and avoiding an
enforcement action.
For more information about our corporate compliance assistance program,
contact Amy Edwards, Steve Gordon, or Jim Rodio at 202-955-3000.