Look for these regulations to add thousands of dollars to remodeling costs in pre1978 rental properties.
Put that paint brush back on the shelf. Leave that hammer and saw on the tool bench. Don’t even think about replacing the carpet. Beginning April 22nd 2010, new EPA rules went into effect that can cost landlords thousands of dollars for failing to comply. Even landlords who work on their own properties themselves fall under these regulations. I will explain.
In a nutshell, in any residential building built before 1978, when lead paint was banned for residential use, and that is a dwelling of at least one bedroom occupied by a family with a child under six, all work that involves over six square feet of interior space and over 20 square feet of exterior space and that has children under six living in it must be performed by someone who is trained by a certified lead trainer in proper lead paint procedures. You, or the contractor, must give the tenants who will be affected the EPA pamphlet “Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools.” But there is an exception that I will get to later.
These rules have the potential to cost each landlord considerable extra money for every repair done on a target property. If the work is done by certified contractors the extra cost will be in the hundreds of dollars. Two Cincinnati area contractors, as reported in the April 19, 2010 Cincinnati Enquirer, estimate it will add at least $375 to a bathroom remodel and $100 for each window replacement because of the training, licensing and new equipment costs.
The new lead compliance rules will be a financial burden to landlords who want to do their own work because the cost of training and compliance is high and landlords can be sued for violations they had no control over.
The Costs
If you want to do any work on your own properties that falls under the aegis of these new rules, you will have to be trained and certified. The cost of training varies from $185 to $295 from the companies I called. The price seemed to go up the farther east and north I went. Of the five companies I called, Home Safe Environmental in Loma Linda, California, was least expensive at $185. Big Apple Occupational Safety Group in New York City was most expensive at $295. All assured me that they had group rates, though. That is just the beginning.
Good luck getting the training in your hometown. When I entered my zip code, 85737, in the EPA’s search for training companies, the closest training companies where in either the Los Angeles or Las Vegas areas. No trainers here in spite of the fact that Tucson is a big city, over 1 million people. Phoenix is even bigger, the fifth largest city in the country, and there are no certified trainers there, either. So imagine what smaller city and town landlords to get training. So add travel and lodging expense to the training cost. Assuming airfare, lodging and meals, the total cost for training could easily exceed $1,000.
Even after landlords get the training, they face additional costs. Send a check off to the EPA. It is assessing fees for processing the certification and sending you an official-looking certificate. Individuals, such as landlords, are assessed a $310 fee. Other fees increase from there with “Firm Certification” running $550. Now wait five years and do it all again.
The Fines
The EPA may assess fines of up to $32,500 a day per violation. Multiple violations can add fine on fine. In its compliance guide, the EPA writes, “The EPA (or a state, if this program has been delegated to it) may file an enforcement action against violators seeking penalties of up to $32,500 per violation, per day. The proposed penalty in a given case will depend on many factors, including the number, length, and severity of the violations, the economic benefit obtained by the violator, and its ability to pay.”
The compliance guide adds, “EPA has policies in place to ensure penalties are calculated fairly.” Fairly to whom?
But anyone can sue, not just the EPA. This could be a license for landlord haters to victimize people who did essentially nothing wrong. So if some do-gooder neighbor of your rental property thinks you haven’t followed these new EPA rules to the letter, he or she can file suit against you asking for the same damages as the fines the EPA would assess. Would this landlord hater win? It’s hard to say. But, you know how landlords sometimes fare in eviction court. But even if a landlord wins, he or she loses because of having to hire a lawyer and defend him or herself in court. Of course, we could countersue for malicious prosecution, but chances are the landlord hater doesn’t have much money and is using this opportunity to make some.
“But I have a property manager!”
You are not off the hook if you have a property management company or manager. All work done on a rental property that fall under the designation “target” must be done by a “Certified Renovation Firm.”
Property management companies can have someone get training and become a “Certified Renovation Firm” on their own, which means they can supervise the activities of people doing work on the properties they manage. And that can be your concern.
What happens if a management company uses non-certified contractors to do work on your property, is not a certified renovation firm, and the contractors don’t follow the EPA rules? Three people get sued and/or fined, the contractor, the management company and you. You will get sued because landlords have “deep pockets,” and that’s what lawyers look for when they look for someone to sue. The contractor is probably nowhere to be found; the property manager may be hanging on by his or her fingernails; and you own property.
The reason is that the management company is your agent and those who hire agents are responsible for their agents’ acts. Would the person suing win? It’s hard to say. But remember what happens too often to landlords in eviction court. But even if you win, how much did the lawyer cost?
Any property management company that is a member of a professional association, such as NARPM or the National Association of Realtors, should be aware of the new regulations if its officers are paying any attention at all. But many are not aware because they either are not members or they don’t pay attention; and the EPA has been by and large silent about the imposition of these new regulations.
So if your management company seems to be or is unaware of the new regulations, fire it. I don’t care how good a job it has been doing; its ignorance of the law puts you in serious jeopardy. And if it is unaware of these rules, of what else is it unaware?
Real estate is one of the most regulated industries in this country. Every professional in the field should make every effort to stay current with all laws and regulations. Failure to do so indicates that those people are not truly professionals.
What if my tenant does work?
The trigger for the regulations is “compensation.” If someone receives compensation for working on a rental property, he or she must be certified. That means homeowners can work without the lead training on their own properties because they don’t received any compensation. One of your tenants can also do it himself on his own home without compensation; but if you give a rent discount, that would be considered “compensation” and your tenant would have to get the training and be certified .
Of course, then you have the issue of how good a job your tenant would do. But that’s another issue entirely.
The exception
Even if your property was built before 1978, that doesn’t necessarily mean it has lead paint or lead paint everywhere. Often, lead paint was only present on woodwork, such as doors, door frames and window frames. That means the walls didn’t have any lead paint on them ever. How do you find out if that’s the case in your property? Have it tested by a certified lead inspector or lead risk assessor.
What they do is perform a surface by surface inspection to discover if there is lead-based paint present. Usually, they use an XRF, x-ray fluorescence machine, that quickly measures the amount of lead paint and documents the results. The cost runs from $500 to $5,000 depending on how much surface the technician tests. A single-family home would be in the $500-750 range while an apartment complex could be up to $5,000.
If you do have the testing done and the inspector finds evidence of lead paint, you must disclose that to any new or renewing tenant. If the inspector finds no lead paint, though, you don’t have to have a certified contractor perform work on your property, just as you would not have to with post-1978 properties. You also would not have to notify affected tenants that they needed to watch out for lead-paint poisoning for their children.
