In late 1996, new federal lead paint disclosure regulations went into effect. The regulations require many persons who sell or lease residential real estate to provide information to buyers and tenants regarding the potential dangers of lead paint.
Most houses built before 1978 contain some lead paint. As long as painted surfaces are in good condition, lead paint poses little risk. However, if not maintained or if improperly worked on, lead paint chips and dust can be released and ingested by children and adults. If ingested in sufficient quantities, many studies indicate lead may cause neurological injuries, which can lead to decreased intelligence and behavioral problems. While there still is a great deal of debate in academic circles regarding how great a problem lead exposure is, the federal government has taken the position that the problem is potentially significant enough to require greater public awareness.
In Milwaukee, most of the housing and rental stock was built before 1978, and lead paint poisoning is not a problem confined to the inner city. There was a case in the Milwaukee area recently in which a young child in an upper middle class family was seriously injured due to lead ingestion that occurred during a home renovation project, and in Waukesha in 1990 a young child died due to lead paint exposure.
The new federal regulations are designed to make the general public more aware of the potential dangers posed by lead paint. The method by which the government has decided to increase awareness is to require most landlords and sellers of residential property built before 1978 to give renters and buyers of residential properties a federally approved lead-hazards information pamphlet. Landlords and sellers must also disclose to buyers and sellers the results of any tests done at the property which disclose the existence of lead-based paint or hazards at the property. There are some exceptions to the rule -- some elderly housing, some disability housing, some "vacation home" leases -- but otherwise the scope of the regulation is quite broad.
Those who should be concerned about complying with the regulation include not only landlords and sellers of residential real estate, but also lenders (who foreclose on residential real estate) and real estate agents.
There are some stiff statutory penalties provided for in the new regulations. Although there are as of yet no court decisions regarding the regulations, courts may in the future decide to consider violations of the regulations as evidence of negligence in personal injury lawsuits. The incidence of lead poisoning lawsuits are on the rise nationally and locally, and this office has handled several such cases. Damages in lead poisoning cases can be significant -- it is not uncommon for lead plaintiffs to allege damages in excess of one million dollars -- and many insurance policies now expressly exclude coverage for such claims.
To protect yourself from such claims, there are several things you can do. Obviously, you should take steps to comply with the new federal regulations. Copies of the required federal pamphlet that must be given out can be obtained by calling our offices. Additionally, if you own rental property, you should ensure you are in compliance with local building code requirements relating to lead paint. If you have lead paint in your property, you may want to consider establishing a program to manage the lead paint, and document the process, so that a tenant cannot later claim "you did nothing" in response to a known risk.
If you become aware that a child living in an apartment owned by you has an elevated blood lead level, you should immediately contact a lawyer. There are practical, low-cost strategies for responding to such a situation, which can both help the child and help to minimize the risk of significant liability on your part.
Finally, owners of residential income property should give serious consideration to transferring ownership of the property to a separate entity. By establishing a separate entity -- such as a corporation or limited liability company (LLC) -- you may be better able to protect your personal assets in the event of a claim arising out of the property. If you hold the property personally and have no insurance coverage for lead poisoning claims, and a tenant successfully brings a lead poisoning claim against you, the tenant will seek to collect the judgment from your personal assets. Most people agree that it is better to have at risk the limited assets of a corporation (possibly only the duplex or apartment building at which the poisoning occurred), than to have at risk one's personal assets (such as your house or savings). Lawyers at Cook & Franke can help individuals adopt practical strategies to help minimize the risk of investing in residential income property.