For the prior video in this series covering asbestos in construction materials, click here.

Lead-based paint in pre-1978 property

Lead-based paint, defined as any surface coating containing at least 1.0 milligram per square centimeter of lead, or 0.5% lead by weight, was banned by the Federal Consumer Product Safety Commission in 1978. [24 CFR §35.86; 40 CFR §745.103]

A lead-based paint hazard is any condition that causes exposure to lead from lead-contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects. [24 CFR §35.86; 40 CFR §745.103]

An agent, prior to meeting with the owner to list an older single family residence (SFR) property for sale, gathers facts about the property, its ownership and its likely market value.

As the first step, the agent pulls a property profile on the SFR from a title company website.  On receipt of the profile, the agent confirms their suspicion that the structure was built prior to 1978. The agent is now aware the property is the target of separate state and federal environmental protection disclosure programs designed to prevent the poisoning of children by the presence of lead-based paint.

The agent meets with the owner to review the requisite listing and marketing requirements laid down by the agent’s broker. To prepare for the meeting, the agent fills out the listing agreement and attaches all the information disclosure forms needed to properly market the property and locate a buyer, called a listing package.

Disclosed on two forms

Among other informational forms for this pre-1978 SFR property, the agent includes two forms which address lead-based paint conditions on the property:

On review of the listing agreement with the owner, the agent explains the owner’s legal obligation, owed to prospective buyers and buyer’s agents, to provide them with all the information:

  • known to the owner or readily available to the owner’s agent on observation or inquiry; and
  • which might adversely affect the value of the property.

A full disclosure to the prospective buyer about adverse conditions on the property does not entail a review or explanation by the seller’s agent about their effect on the buyer or the property once the facts are disclosed. Application of the facts disclosed and the potential consequences flowing from the facts which may affect the prospective buyer’s use, possession or ownership of the property are not among the seller’s agent’s duties of affirmative disclosure.

Seller’s agent insures compliance

However, federal LBP rules do require the seller’s agent to advise the owner about the requirements for disclosures to be made to prospective buyer before they enter into a purchase agreement. It is the seller’s agent who insures compliance by the owner before entering into a purchase agreement.

Editor’s note — The owner has no obligation to have the property inspected or a report prepared on the presence of lead-based paint or any lead-based paint hazards. Also, the owner need not perform any corrective work to clean up or even eliminate the lead-based paint conditions, unless agreed to with the buyer. [24 Code of Federal Regulations §35.88(a); 40 CFR §745.107(a)]

Thus, the owner cooperates in the LBP disclosure and their agent’s other marketing efforts by:

  • filling out and signing the federal LBP disclosure form required on all pre-1978 residential construction [See RPI Form 313];
  • filling out and signing the TDS containing the lead-based paint, environmental and other property conditions [See RPI Form 304];
  • making a physical home inspection report available to prospective buyers as an attachment to the TDS form; and
  • providing the seller’s agent with copies of any reports or documents containing information about lead-based paint or lead-based paint hazards on the property.

LBP disclosure content

The LBP disclosure form includes the following:

  • the Lead Warning Statement as written in federal regulations [See RPI Form 313 §1];
  • the owner’s statement disclosing the presence of known lead-based paint hazards or the owner’s lack of any knowledge of existing lead-based paint [See RPI Form 313 §2];
  • a list of records or reports available to the owner which indicates a presence or lack of lead-based paint, which have been handed to the seller’s agent [See RPI Form 313 §2.2];
  • the buyer’s statement acknowledging receipt of the LBP disclosure, any other information available to the owner and the lead hazard information pamphlet entitled Protect Your Family From Lead in Your Home [See RPI Form 313 §3.1; see RPI Form 316-1];
  • the buyer’s statement acknowledging the buyer has received a 10-day opportunity to inspect the property or has agreed to reduce or waive the inspection period [See RPI Form 313 §3.2];
  • the seller’s agent’s statement noting the owner has been informed of the owner’s disclosure requirements and that the agent is aware of their duty to ensure the owner complies with the requirements [See RPI Form 313 §4]; and
  • the signatures of the owner, buyer and seller’s agent. [24 CFR §35.92(a)(7); 40 CFR §745.113(a)(7)]

The owner and the seller’s broker each keep a copy of the disclosure statement for at least three years from the close of escrow on the sales transaction. [24 CFR §35.92(c); 40 CFR §745.113(c)]

Further, the disclosure form is to be written in the language of the purchase agreement. For example, if the purchase agreement is in Spanish, then the LBP disclosure will also be in Spanish. [24 CFR §35.92(a); 40 CFR §745.113(a)]

Opportunity to evaluate risk

A prospective buyer of a residence built prior to 1978 is put on notice of LBP conditions by handing them the disclosure forms before they make an offer. The disclosures advise them they have a 10-day period after their offer is accepted to evaluate the lead-based paint risks involved. When timely disclosed, the buyer may not later, when under contract, use the existence of lead-based paint as justification for cancellation.

The buyer may agree to a lesser period of time or simply waive all their rights to the federally permitted risk evaluation period. However, disclosures about the SFR property cannot be waived by the use of an “as-is” sale provision or otherwise. [40 CFR §745.110(a); see RPI Form 313]

Foreclosure sale exemption

Exempt from the Federal LBP disclosures are foreclosure sales of residential property. [24 CFR §35.82(a)]

Yet, a foreclosing lender still has a common law duty to disclose property defects known to them at the time of the foreclosure sale. A foreclosing lender is not protected from liability for intentional misrepresentation (negative fraud by omission – deceit) when the property is sold “as-is” at a foreclosure sale and the foreclosing lender previously fails to disclose a known defect to the bidders. [Karoutas v. HomeFed Bank (1991) 232 CA3d 767]

However, the LBP foreclosure exemption does not apply to the resale of housing  previously acquired by the lender at a foreclosure sale, commonly called real estate owned (REO) property, or to the resale by a third party bidder who acquired the property at a foreclosure sale.

Thus, if a lender or other bidder who acquired property at a foreclosure sale is reselling it, the resale needs to comply with the lead-based paint disclosure requirements. [61 Federal Register 9063]