The EPA Lead Paint Rule (RRP Rule)…An Exemption for Real Estate Investors?

The EPA lead paint rule (RRP Rule) takes effect on April 22nd, 2010.  The rule is causing a lot of concern among real estate investors, renovators, and contractors.  Currently, the rule seeks to require contractors to get certified before engaging in any substantive work on lead-based paint.   In addition to this, the expansive rule requires contractors to provide certain disclosures to owners and it mandates how renovations involving lead-based paint shall be handled.  

The rule will have a significant effect on the scope and cost of renovations and will also have a broad effect on a number of sub-trades including window installers, plumbers, electricians, and more.

There are also lingering questions about how this rule will be enforced since it will be a federal law.  The EPA has issued statements that indicate the law may be enforced through a “snitch on your neighbor” approach, whereby a neighbor may be able to sue those in violation of the law.  Some experts believe the EPA may even push for states and cities to enforce the law.  However, given the many current state and municipal budget constraints, it seems difficult to believe states and cities will be lining up to police this matter.  Clearly, there are a lot of gray areas and unfinished business regarding this rule.  For this reason, Senator Amy Klobuchar of Minnesota sent a letter to the EPA requesting they put the law on hold until it is clarified and more contractors are able to get certified.

Furthermore, many real estate investors have asked me if there are any exemptions to this broad rule.  The rule currently suggests that some exemptions will be granted.  For example, owners may “opt-out” if the owner signs a statement declaring the property is not the residence of;  1) a child under age 6,  2) a pregnant woman, or  3) a child-occupied facility. 

However, the EPA also includes language in this part of the rule which states the owner must declare; “the renovation will occur in the owner’s residence.”  I recently called the EPA and spoke with a person directly involved in drafting the legislation.  I wanted to know if the emphasis in this sentence was on “in” (meaning inside the home) or on “owner’s residence” (i.e. primary residence)…or both.  Or, did they simply not take into account the many renovations that take place in vacant homes…thus drafting this part in an unclear manner.  I also explained that thousands of real estate investors, like myself, renovate vacant homes in which they could declare all three of the first conditions to be true.  However, this one sentence seems to potentially kill any opportunity for real estate investors to claim the exemption.  After speaking with this source, they indicated that an owner who renovates a vacant house with the intention to resell it would qualify for the exemption since the rule was only intended for situations in which the home would be subsequently rented.  However, I then received an email from this source about one week later indicating that they spoke to other colleagues at the EPA, and that they believed the owner may need to occupy the home.  Quite frankly, I was not convinced that they knew for sure either way!

Given all the other ambiguities of the law, and the poor implementation by the EPA, I am not surprised that they are not clear on this piece of the rule.  The rule is written in a way that suggests a higher risk of lead based paint poisoning  exists in a vacant home than an occupied home!  Not sure I understand that logic.

So currently, if a resident-owner provides a release/waiver to a contractor, the renovation would be exempt from the training, certification, and work practice requirements of the regulation.  On the other hand, real estate investors who rehab a home that is vacant may not be eligible for an exemption.

Furthermore, the EPA is reportedly considering removing the opt-out provision entirely from the rule.  However, they have not released any formal decision on the matter.  Given the lack of certainty by the EPA on this at the moment, I think real estate investors could still seek an exemption from this rule by signing a release/waiver and providing it to the contractor who undertakes the renovation.  Unless you live one of the few states in which EPA has delegated authority to local agencies to enforce the matter, I doubt that real estate investors will encounter any problems in doing so.

  

UPDATE (07-23-2010)

The EPA is delaying enforcement of the Lead Paint Rule (RRP Rule).  See the blog entry here:

http://alexeverest.com/2010/07/28/epa-delays-enforcement-of-lead-paint-rule-rrp-rule/    

UPDATE (04-23-2010)

The EPA took action to eliminate the “opt-out” provision on April 23, 2010.  However, the removal of the opt-out provision will not take effect until 60 days after the change to the rule is reflected in the Federal Register.  As of the date of this writing, the rule change has not been submitted to the Federal Register.

  

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About the Author

Alex Everest, President of Deal Maker Library, is a real estate investor, author, speaker, and advisor from Minneapolis, Minnesota.  He has been involved in hundreds of real estate deals since 2004.  Alex is frequently relied upon for real estate investing advice by novice and veteran investors alike.

www.dealmakerlibrary.com

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