Failure to Disclose Lead-Based Paint Hazards in Residential Housing May Result in Civil Penalties

The U.S. Environmental Protection Agency (EPA) began filing civil penalty complaints against landlords, real estate firms, and other government agencies for failing to comply with the Real Estate Notification and Disclosure Rule ("Disclosure Rule"), codified as Title 40 C.F.R., Part 745, Subpart F. The Disclosure Rule, which became effective in March 1996, requires the disclosure of information concerning lead-based paint and lead-based paint hazards in residential housing.

Lead Disclosure Rule Requirements

Under the Disclosure Rule, any seller or landlord must disclose information concerning lead-based paint and/or lead-based paint hazards when selling or leasing to any prospective purchaser or tenant of residential housing. The residential housing covered by the Disclosure Rule are those units built before 1978. The rule also requires disclosure from brokers, real estate agents, and any other agent representing a seller or landlord.

The seller or landlord is required to provide the tenant or purchaser with an EPA-approved lead pamphlet, and copies of any record or inspection report concerning lead-based paint and/or lead-based paint hazards. A purchaser must also be provided with the opportunity to perform a lead inspection within ten days of signing the purchase agreement, unless the purchaser waives its right of inspection. Finally, a lead disclosure form, stating that the lead pamphlet was presented along with any records or reports relating to lead-based paint and/or lead-based paint hazards, must be signed by the parties and included in the lease or purchase agreement. Although the purchaser or tenant must receive the information before signing a lease or purchase agreement, the Disclosure Rule does not require the seller, landlord, or their representative to pay for a lead inspection or to cure the existence of lead if found in the housing unit.


The EPA uses numerous methods to determine compliance with the Disclosure Rule. One method requires EPA inspectors to conduct inspections of lease and purchase agreements at realty firms, rental offices, and other places where these documents are maintained. The inspectors will explain the purpose of the inspection, and ask for permission to review the relevant documents. Upon a review of the documents, the inspectors will be able to determine whether the lead disclosure form was incorporated in lease and purchase agreements. The inspectors are not responsible for determining whether a violation occurred. The results of the inspection are provided to the inspected office at a later time.

The EPA can also issue an information request letter to any person who controls lease and purchase agreements. An information request letter asks the recipient to provide the EPA with copies of lease and purchase agreements for housing units covered by the Disclosure Rule, or any other information that would evidence compliance.

Additionally, the EPA may issue a subpoena to gather compliance information. Pursuant to Section 11(c) of the Toxic Substances Control Act, 15 U.S.C. § 2610(c), the EPA has the power to subpoena witnesses, reports, documents, papers, answers to questions, and other information the EPA deems necessary. Moreover, the EPA's subpoena power under Section 11(c) has been viewed broadly, and failure to comply with the EPA subpoena could result in the imposition of civil penalties. See EPA v. Alyeska Pipelines Services Co., 836 F. 2d 443 (9th Cir 1988).


In January 1998, the EPA issued the Real Estate Notification and Disclosure Rule Interim Final Enforcement Response Policy, which provides that the penalty in an enforcement action for first time violations depends on whether the violation is characterized as egregious or nonegregious. An egregious violation involves the failure to comply with the Disclosure Rule for a housing unit occupied by a young child or a pregnant woman. A violation is nonegregious when no child or pregnant woman occupies the housing unit.

The EPA will bring civil penalty actions for egregious violations, and issue notices of noncompliance or warning letters for nonegregious violations. Moreover, anyone who leased or purchased a home covered by the Disclosure Rule can bring a civil action against the seller, landlord or agent for failing to disclose the required information for treble damages. 42 U.S.C. § 4852d(b)(3). Since the EPA began enforcement of the Disclosure Rule in 1997, it has brought four civil penalty actions, and issued numerous warning letters to real estate agents, landlords, brokers, sellers, and agents for failing to disclose lead-based paint information. So far, the civil penalties sought by the EPA have totaled over $400,000.


Though the penalties can be substantial, the EPA is providing means for potential violators to mitigate damages. For instance, the EPA may grant a 100% reduction on the gravity-based penalty for self reported violations that meet the requirements of the EPA audit policy. Incentive for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations Final Policy Statement, 60 Fed. Reg. 66,706 (Dec. 22, 1995). The EPA has also indicated a willingness to negotiate reduced penalties in return for the implementation of a supplemental environment project, an environmentally beneficial project that a violator agrees to perform as a part of a settlement. See Supplemental Environmental Project Policy (May 1, 1998).

Owners should also be aware of a new rule recently finalized by the EPA regarding lead-based paint hazards. This new rule generally requires renovators of pre-1978 housing to provide the owners and occupants of that housing with information on lead hazards. See 63 Fed. Reg. 29907 (June 1, 1998). The rule went into effect on June 1, 1999.

Parties who may be affected by the Disclosure Rule should determine its applicability to specific housing units. Any party seeking to sell or rent a housing unit that may be affected should refer to the rule prior to the completion of the transaction. Moreover, the reader should be cautioned that any activities involving lead-based paint may also invoke other significant environmental requirements, and legal advice should be sought for any particular structure.

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