Property Owners and Agents Beware: HUD Launches Aggressive Lead-Based Enforcement Initiatives
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.