CHAPTER 14: CHAPTER 14: REAL ESTATE TRANSACTION PROCEDURES
14.2 Regulatory Requirements for Real Estate
An estimated 1.7 million children in the U.S. have elevated blood lead levels. Often, the source o f lead exposure is in their homes. As one o f several initiatives to reduce lead exposure in homes, Section 1018 of the Residential Lead- Based Paint Hazard Reduction Act o f 1992 (Title X) mandated EPA and HUD to promulgate the disclosure regulations described below.
Requirements for Disclosure of Known Lead-Based Paint and/or Lead Based Paint Hazards in Housing (HUD 24 CFR Part 34 and EPA 40 C F R Part 745) - EPA and HUD jointly promulgated these regulations that require the
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Exhibit 14.1 Example Outline Standard Operating Procedure for
Real Estate Transactions Purpose and Applicability of Real Estate Transaction Procedures
Procedures for Selling Facilities
A. Disclosure of known lead based paint and/or lead-based paint haTards
1. What must be provided to potential purchasers
2. When disclosure will be made B. Required contract language Procedures for Leasing Facilities
A. Disclosure of known lead based paint and/or lead-based paint haTards
1. What must be provided to potential lessees
2. When disclosure will be made B. Required contract language
Procedures for Purchasing or Leasing facilities A. Review of documentation
B. Evaluation of vacant land for soil lead hazards C. Classification of facilities as Class A, B or C
and determination if further evaluation is necessary
Documentation and Record Maintenance
disclosure of known lead-based paint hazards by persons selling or leasing target housing. Target housing is any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than 6 years o f age resides or is expected to reside in such housing) or any 0-bedroom dwelling.
The permitted exclusions for disclosure requirements are:
9 Transactions to sell properties at foreclosure Rental housing found to be free of lead-based paint (as determined by a certified inspector)
9 Short term leases of 100 days or less
9 Lease renewals (if the lessor has previously disclosed all the required information)
9 The purchase, sale, or servicing of mortgages
9 The sale or lease of 0-bedroom dwellings (i.e. efficiency apartments, dormitories)
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Figure 14.1: Real Estate Transactions
Disclose presence of known L B P and lead hazards when offer facilities for sale o r lease
Ensure pre-1978 residential sale o r lease contracts &
procedures follow HUD/EPA disclosure rule
Evaluate soil on vacant land exposed to significant environmental lead sources
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Classify facilities before buying or renting; consider lead hazard evaluations
As appropriate, restrict facility use restricting lead dust generation or require dust containment
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Document actions and maintain records
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9 Informal rental agreements
The regulations contain explicit requirements for lessors, sellers, and sellers' agents. The categories of activities include disclosure requirements for sellers and lessors, providing purchasers the opportunity to conduct an evaluation, certification and acknowledgment o f disclosure, and agent responsibilities.
Disclosure Requirements
Sellers and lessors are required to conduct the following activities before the purchaser or lessee is obligated under contract to purchase or lease unexempt target housing:
Provide the purchaser or lessee with an EPA-approved lead baTard information pamphlet such as the EPA document entitled Protect Your Family From Lead in Your Home (EPA #747-K-94-001), or an equivalent pamphlet that has been approved for use in the State by EPA.
. Disclose to the purchaser or lessee and the agent the presence of any known lead-based paint and/or lead hazards in the subject property and any additional information available concerning the known lead-based paint and/or lead-based paint haTards. Examples o f this information include the basis for the determination that lead-based paint and/or lead-based paint hazards exist; the location of lead-base paint and/or lead-based paint baTzrds; and the condition of the painted surfaces.
. Inform the agent of the existence of any available records or reports pertaining to lead-based paint and lead-based paint haTards.
. Provide to the purchaser or lessee any available records or reports pertaining to lead-based paint and/or lead-based paint hazards in the subject property. This requirement includes records and reports regarding common areas and other residential dwellings in multifamily target housing (if the information is pan o f an evaluation or lead hazard control effort in the target housing as a whole).
Opportunity to Conduct an Evaluation
A seller must provide a ten day period for the purchaser to conduct a risk assessment or inspection for lead-based paint before the purchaser is obligated under contract to buy the target housing.
Cert~cation and Acknowledgment of Disclosure (Required Contract Language)
Exhibit 14.2 provides a sample format for the information that must be included in contracts for selling target housing. The required elements are:
1. A lead warning statement (See Exhibit 14.2).
. A statement disclosing the presence of known lead-based paint and/or lead-based paint hazards in the subject housing; or a statement indicating no knowledge of the presence of lead-based paint and/or lead-based paint hazards.
. A list of any available records or reports pertaining to lead-based paint and/or lead-based paint hazards that has been provided to the purchaser. If no such information is available the seller should so indicate.
4. A statement of the purchaser affirming receipt of the above information.
. A statement by the purchaser that he/she has either received the opportunity to conduct a risk assessment or inspection or has waived the opportunity.
. If an agent is involved in the transaction on behalf of the seller, a statement that the agent has informed the seller o f the regulatory requirements for disclosure and the agent is aware of his/her duty to ensure compliance with these requirements.
. The dated signatures of the sellers, agents, and purchasers, certifying the accuracy o f their statements, to the best of their knowledge.
Certain information must also be included in contracts for leasing target housing. This information is similar to the information discussed above, with a few modifications. An example format is provided in Exhibit 14.3 and the elements are described below.
1. A lead warning statement (See Exhibit 14.3).
A statement disclosing the presence of known lead-based paint and/or lead-based paint hazards in the subject housing; or a statement indicating no knowledge of the presence of lead- based paint and/or lead-based paint hazards.
E x h i b i t 14.2: S a m p l e D i s c l o s u r e F o r m a t for T a r g e t H o u s i n g Sales Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards Lead Warning Statement
Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such a property may present exposure to lead from lead-based paint that may place young children at risk o f developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient,
behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller's possession and notify the buyer o f any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.
Seller's Disclosure
(a) Presence of lead-based paint and/or lead-based paint hazards (check (i) or (ii) below):
(i)--Known lead-based paint and/or lead-based paint hazards are present in the housing (explain).
(ii)---Seller has no knowledge of lead-based paint and/or lead-based paint hazards in the housing.
Co) Records and reports available to the seller (check (i) or (ii) below):
(i)---Seller has provided the purchaser with all available records and reports pertaining to lead-based paint and/or lead-based paint baTards in the housing Oist documents below).
(ii)--Seller has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in the housing.
Purchaser's Acknowledgment (initial)
(c) --Purchaser has received copies of all information listed above.
(d) --Purchaser has received the pamphlet Protect Your family from Lead in Your Home.
(e) ---Purchaser has (check (i) or (ii) below):
(i)---received a 10-day opportunity (or mutually agreed upon period) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead based paint baTards; or
(ii)---waived the opportunity to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards.
Agent's Acknowledgment (initial)
(f) --Agent has informed the seller of the seller's obligation under 42 U.S.C. 4852d and is aware of his/her responsibility to ensure compliance.
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the information the)' have provided is Irue and accurate.
Seller Date Seller
Purchaser Date Purchaser
Date Date Date
Agent Date Agent
(Adapted fi'orn 24 CFR Part 35, Vol. 61, No. 45, Wednesday, March 6, 1996)
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Exhibit 14.3: Sample Disclosure Format for Target Housing Rentals and Leases
Disclosure of Information on Lead-Based Paint and/or Lead.Based Paint Hazards Lead Warning Statement
Housing built before 1978 may contain lead-based paint. Lead form paint, paint chips, and dust can pose health hazards if not managed properly. Lead exposure is especially harmful to young children and pregnant womert Before renting pre-1978 housing, lessors must disclose the presence o f known lead- based paint and~or lead-based paint hazards in the dwelling. Lessees must also receive a federally approved pamphlet on lead poisoning prevention.
Lessor's Disclosure
(a) Presence of lead-based paint and/or lead-based paint hazards (Cheek (i) or (ii) below):
(i)--Known lead-based paint or lead-based paint hazards are present in the housing (explain).
(ii) Lessor has no knowledge of lead-based paint and/or lead-based paint hazards in the housing.
(b) Records and reports available to the lessor (Cheek (i) or (ii) below):
(i)--Lessor has provided the lessee with all available records and reports pertaining to lead-based paint and/or lead-based paint baTards in the housing (list documents below).
(ii) Lessor has no reports or records pertaining to lead-based paint and/or lead-based paint baTards in the housing.
Lessee's Acknowledgment (initial)
(c) --Lessee has received copies of all information listed above.
(d) --Lessee has received the pamphlet Protect Your Family from Lead in Your Home.
Agent's Acknowledgment (initial)
(e) --Agent has informed the lessor of the lessor's obligations under 42 U.S.C. 4852d and is aware of his/her responsibility to ensure compliance.
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the information they have provided is true and accurate.
Lessor Date Lessor
Lessee Date Lessee
Date Date
Date
Agent Date Agent
(Adapted from 24 CFR Part 35, Vol. 61, No. 45, Wednesday, March 6, 1996)
. A list of any available records or reports pertaining to lead-based paint and/or lead-based paint haTards that has been provided to the purchaser. I f no such information is available the seller should so indicate.
3. A statement o f the lessee affirming receipt of the above information.
4. The dated signatures of the lessors, agents, and lessees, certifying the accuracy of their statements, to the best of their knowledge.