Purchasing property with uncertain lead status
Shrewsbury, MA · Member since 2021 · 45 posts · 5 votes
Hi BP community, my name is Tinah - a brand new real estate investor and I am in a bit of pickle - need guidance.
I signed a P&S agreement on a property and later realized that by law the lead disclosure on lease did not cover the infant living in the unit. No child under six is allowed to live in apartment without deleading certificate.
Discussed this with my realtor and lawyer, both downplayed the potential hazard and legal liability of possible lead in the property. Both are of the opinion that I have buyer's remorse.
Unsure how to proceed - should I cut my losses now or proceed with transaction and delead after closing and set up an LLC?
Don't know if I should trust my realtor and lawyer.
Would appreciate your experience and knowledge. Thank you.
Your landlord and agent are wrong and I would honestly fire them both. The liability for that tenant will be yours if you close. The law states that you have 90 days after closing to delead a building to avoid the liability of past tenants (not just the current one). MA is cracking down and going after owners hard on this. They want every rental in the State deleaded.
You can get a lead inspection (I recommend Anderson Lead Inspections at www.andersonlead.com) and use that to get an estimate on deleading the building. Then use that estimate to get the seller to pay for the deleading. You can reduce the offer by half of the cost of the deleading AND have the seller give you a concession for the other half. That way you both pay half of the deleading, but because the seller came to the table with a check for half, you would use that check to pay your half and essentially you're paying your half with money that was included in the mortgage.
The half you took off the price of the house was the seller's half. The seller's concession is basically a legal way that your bank finances repairs as well as the mortgage (the bank pays the seller, but the seller gives you the money back for the repair). If you took the total cost of the deleading off the offer and the seller paid it all out of his profits, then you actually have to come out of pocket with the cash to pay for it. With the 50/50 split, at least you're financing your half and essentially the tenant is paying for it with the mortgage paydown.
Good luck on your purchase!
Derreck
Your landlord and agent are wrong and I would honestly fire them both. The liability for that tenant will be yours if you close. The law states that you have 90 days after closing to delead a building to avoid the liability of past tenants (not just the current one). MA is cracking down and going after owners hard on this. They want every rental in the State deleaded.
You can get a lead inspection (I recommend Anderson Lead Inspections at www.andersonlead.com) and use that to get an estimate on deleading the building. Then use that estimate to get the seller to pay for the deleading. You can reduce the offer by half of the cost of the deleading AND have the seller give you a concession for the other half. That way you both pay half of the deleading, but because the seller came to the table with a check for half, you would use that check to pay your half and essentially you're paying your half with money that was included in the mortgage.
The half you took off the price of the house was the seller's half. The seller's concession is basically a legal way that your bank finances repairs as well as the mortgage (the bank pays the seller, but the seller gives you the money back for the repair). If you took the total cost of the deleading off the offer and the seller paid it all out of his profits, then you actually have to come out of pocket with the cash to pay for it. With the 50/50 split, at least you're financing your half and essentially the tenant is paying for it with the mortgage paydown.
Good luck on your purchase!
Derreck
Thank you @Derreck Wells, this is the missing information I have been looking for! This resource should be in real estate investing books. It's a landmine for the unsuspecting investor. I wish I had known this before making any offer.
Unfortunately for me, I am in a dire position. The seller refused lead inspection and they refused to renegotiate the terms of agreement because "the tenants are not concerned." My realtor and lawyer agree with them, essentially they are bullying me into buying the property or risk losing my deposit or go through litigation (threat from my lawyer, my agent and the seller's lawyer).
I think this is what they call - being royally screwed. I have yet to consult with a litigator but I am thinking, if they want to sell, can seller put the property back in the market if it is under litigation? Also, wouldn't a litigation make the problem of a child living illegally in a property without a deleading certificate public? Wouldn't that increase the risk of additional legal liability (long-term) and harm their chances of a sale (short-term)?
This is very helpful and my hope is, other newbies like me can learn from this unfortunate experience of mine. Thank you again.
You can pay for a lead inspection just like you'd pay for a home inspection. The seller doesn't want that because they would then be legally obligated to tell any other potential buyers that there is definitely lead paint.
Do not believe them that the tenant's aren't concerned, I'd bet the tenant's don't know that there is lead paint and the danger their infant is in. They can sue the owner for renting to them without a lead certificate on file with the state. You can also have a conversation with the tenants and let them know.
You're not screwed, in fact, you have all the power in this situation. The current owner is the one breaking the law, not you. A simple call to the board of health or the EPA would cause all kinds of headaches for the current owner. Last September a landlord was fined $26,000 just for not giving the tenant the lead disclosure and lead pamphlet. They're not messing around anymore.
You can get more info about lead paint at that link.
@Tinah Canda
I have never heard of deleading a property.
That aside, you can request a lead inspection as part of your home inspection. The seller doesn’t want it, because if it comes back positive, then they have to disclose it.
When was the house built? If it’s before 1950 there is a very high chance it has lead paint. It started being phased out around then, but wasn’t “banned” until 1978.
I'm not a lawyer, no legal advice, but I'd ask my lawyer why you can't demand the required de-leading certificate before closing if it's required under your local law and ask your agent or his broker why he didn't tell you up front about this requirement before you wrote the offer. Perhaps he did disclose it in a document, so read through your package to see if you've signed something to that point. Ultimately, you expect the transaction to be legal, and if you are accepting the unit with the tenants in place, then you expected a legal transfer with the proper required certificate unless it was disclosed that it was needed and they didn't have it. If seller cannot provide it, won't negotiate to provide it, and is threatening to take your deposit and sue, I'd call the department responsible for issuing them and ask if they'd contact him to require it be done asap. At minimum, I'd at least get an opinion from another lawyer.
@Tinah Canda Hi Tinah, you will run into this problem all the time in MA. So many homes are pre 78 and the owners almost all elect to not test for lead, and this definitely includes investors. Many discriminate against renters with children for this reason. It is illegal to NOT rent to people with a child under 6 because of lead but it is commonly done.
The owner is taking a risk having a little kid in a non-deleaded or non remediated house and is very vulnerable to a tenant suit or god forbid a kid getting lead poisoning. The risk is ever increasing with lower acceptable lead limits and the strict liability Derik mentioned.
But we all grew up in houses with lead paint here in MA and if the interior is in good condition, has multiple paint layers, newer windows (this is a big one) it is often considered a risk worth taking. Windows, door jambs etc. are flash points that can be cared for, and often the interior has been remodeled so many times its clearly, practically, fine. The seller hasn't done anything wrong towards you. Almost every lead paint disclosure you will see on a pre 78 house is "unknown".
This isn't legal advice, I'm not a lawyer. You do have the option of closing, then getting the test for all the reasons @Derreck Wells cites and remediating. You likely have to put the tenants up in a comparable place while doing so. It will likely be expensive-- not necessarily, though-- and is the safest approach and it will increase the value of the property. If the house is in lousy condition with all old windows and peeling paint on the exterior and you would be worried about your own kid in there then you may wish to eat the EMD rather than buy with such a tenant in place.
We tested and had deleaded the interior of a 2000 sf 1895 condo when we had our first son about 10 years ago and it was about $3000. Turned out there wasn't much. You are paying for the skill at remediation and for their assumption of liability.
I think most people familiar with real estate in MA would consider this a common situation and issue, so the experienced parties may be looking at your response as an overreaction or feeling it is on you to have looked at all this more carefully before the offer and inspection. The seller probably feels people will buy anyway. It wouldn't be smart of the seller to allow you to test at this point. Not a criticism from me, mind you, just trying to give you a sense of conventional wisdom.
I agree with @Derreck Wells that if you buy it you should be prepared to go all in and eliminate the issue once and for all within the 90 days.
@Lynn McGeein there is no requirement for a de-leading certificate in MA. The seller is required to sign a lead paint disclosure on a pre-78 house and has the option to check "unknown". As a landlord they are required to give the tenants a lead pamphlet from the state and have them sign a statement acknowledging that the disclosure says its "unknown" if there is lead or not. There is very little incentive (quite the opposite) for a seller to test for lead.
The consequences for lead poisoning of a tenants child are severe, so it is a real risk to not know and rent to a child under 6 without remediating, but it is not illegal. In fact the landlord did the right thing by not discriminating against the child under 6. The seller/landlord hasn't done anything "wrong" here. Doesn't mean everyone involved can't be in for a world of hurt if something goes wrong--with apologies for the quadruple negative.
A question for you...are you still in your DD and do you have any contingencies that aren't yet waived? If so then you still have the option to back out, if not then it seems you may be able to back out but would risk your EMD which may be worth it in your area considering the risk and lesson learned for next time.
@Jonathan R McLaughlin thanks for clarification. Not familiar with MA, but my unit in MD was required to either have a lead-free certificate or be tested in between each tenant, inspected, etc., so a real PITA, but explained to me before I put in the offer. Luckily, I got the lead-free certificate. The post said the seller didn't have the proper tenant lead disclosure that covered the infant and that no child under six is allowed to live in an apartment without the deleading certificate. If this is accurate, then you'd assume the seller would have to be in compliance or at least disclose upfront that the unit is not in compliance before selling with tenant in place. If not accurate, her agent and lawyer should be explaining to her what the actual requirements are, but if she'd have to mitigate within 90 days after closing or be liable as explained earlier and the people representing her did not make her aware of that potential huge expense before she made the offer, it appears there's something wrong there.
@Derreck Wells This is where I made a mistake, I did not know of the specific lead law with children under six and I realized it after the inspection clause lapsed.
Second mistake is I chose the wrong realtor and lawyer, they failed to advise me of the existing lead laws in MA. The lawyer in your team is supposed to keep you legal and compliant with law so you avoid foreseeable liability expenses.
@Account Closed
The house was built in 1916. According to a lead inspector, the house has an 87% chance of testing positive for lead.
The lawyer I am working with got very defensive when I asked questions. The same with realtor. They just kept saying I was aware of the lead disclosure, lead is not a big deal in the property and I have no business making offers if I can't handle lead in a property. No help there.
I did consult with another lawyer, property manager and other close contacts who said the same things as @Derreck Wells. It is a very big liability and expense to take care of. And there's the 90-day time period, you're raising against time too.
I can see why the sellers are doing what they are. My mistake is I did not have all the information I needed regarding lead laws in MA. Yes, definitely everyone - the seller and my team are looking at me as if I am overreacting and blaming me for missing this.
Another thing I have learned though is this - buyers in MA are entitled to 10 days to complete inspections. Another attorney pointed out to me that I was only given 4 days. Realtors and lawyers are supposed to ensure that their client gets this.
It would have been helpful if I were informed of this additional cost so I could have factored it into my analysis. This property is not going to cash flow with the lead expenses.
I think I am still in DD, my lender was able to give me a denial letter. Seller's lawyer was threatening lender and saying that the denial letter was not really a denial. It's apparent that they do not want to give my deposit and earnest money back.
My next option it seems is to litigate.
MA lead laws require lead disclosure to tenants which the seller provided. However, also with children under six, law states that no child shall live in apartment without deleading certificate. So, essentially as a landlord in MA - you are required to delead when child resides in the apartment.
@Tinah Canda am I mistaken BP? I thought all you had to do was seal any lead paint off with other paint.. I’ve seen other discussions on this and this conclusion.. is it different there? As another mentioned, do you really have to de lead the place that can’t be just painting over it? To de lead a wall, you’d have to remove the plaster, which is like removing a swimming pool with a hammer and throwing it away, then you’ll find discrepancies in insulation, termites, electric and framing. It doesn’t sound realistic to de-lead as in actually removing the lead unless you gut the place. If it’s drywall and not plaster, then there’s been some remodeling since 1920.
@Account Closed
Derreck Wells would have the better answer to that question. From my readings, I think you mean encapsulation, there is a specific paint that can encapsulate lead paint. State does not consider it encapsulated unless that specific type of paint was used.
I also read (memory might fail me) that properties built before 1978 have to get lead inspection before starting renovations. From a medical standpoint that makes sense because when you agitate those surfaces, it would release the lead in the air and expose people around the site. That's my understanding of the laws and regulations so far.
@Tinah Canda I think you are smart not to compound any original error by taking on a risk you don’t want to bear. Ignore the realtor, they aren’t qualified but it sounds like the lawyer and the realtor are both saying “don’t worry, it’s never really a problem” which is true…until it isn’t.
You aren’t being well served by your attorney. Having given you their opinion and knowing your choice they should be a staunch advocate for your position. I’d get a new one if u aren’t comfortable. Have a good local one if u wish with lead experience.
@Account Closed you should educate yourself quickly. It's a federal law that you need to give the lead paint pamphlet and lead disclosure to all tenants. There was a landlord here in NH that got fined $26,000 in September 2020 for not giving the tenants the proper papers. Every state has different laws about who you can rent to if there's lead paint in the house. MA is strict and you cannot rent a home built before 1978 to a family with a child under 6 without a Lead Certificate on file with the state. That Lead Cert here in MA means the house is "lead safe", we don't have to remove all the lead paint and make it "lead free". Some states, however, do require "lead free". A lead inspection cannot be done by a home inspector, it's a completely different thing and requires a specific license, training, and equipment. The EPA rules are here, but your state laws will vary. You need to look them up and learn what you have to do there. https://www.epa.gov/lead
@Lynn McGeein the agent didn't mention it because they don't know the lead laws. Most agents aren't very good. (And to the agents that are about to argue with me over this statement, just ask yourself if you know the lead laws, if the answer is "No", then you're not a very good agent. A good agent will know the laws in their state and be able to help their buyers navigate them. There are more to the laws than the standard disclosure form. Take this opportunity to decide to become a better agent and go learn the laws.) As for demanding the Lead Cert before closing, that's a very valid route she can take and probably the best one. The landlord was in violation of the law the minute they signed the family to the lease without it on file, and the EPA is issuing very large fines. And if it was a couple that got pregnant and had the child after living there, the law is very clear that the landlord has to put the tenant up in a hotel while the unit is being deleaded. They cannot evict because the tenant had a child, that's discrimination. Alternatively the seller could simply discount the selling price and be done with it. The MA law actually says that a buyer is liable for any lead poisoning that happened on the property prior to closing if the buyer doesn't start the deleading process within 90 days of closing. If the process is started in that 90 day period, they are no longer liable. The state has attached that liability to the property so it transfers from owner to owner until the property is deleaded. It is actually possible that the seller knows someone has high blood lead levels and is about to be sued and that's why he's trying to sell so quickly. If the sale goes through before he gets sued, the new owner would be liable, unless they delead within the 90 day window but since the agents aren't telling buyers about this... it's a dangerous situation. I personally know a lady that lost her building in a lead paint lawsuit. She had inherited the property from her husband and had no idea of the laws. A professional tenant moved in and immediately claimed her child was lead poisoned on that property and sued knowing there was no lead cert. The tenant won and the owner couldn't afford to pay the lawsuit so had to sign over the property. If she had sold it it wouldn't have sold for enough to cover, but the tenant was willing to "settle" for the deed.
@Tinah Canda You can fire an attorney and real estate agent at any time.
@Account Closed you are absolutley mistaken. You cannot just paint over lead paint and be okay. Your profile lists you as a contractor, I don't know where you're from, but all contractors are required by federal law to get RRP certified by the EPA, they would have told you some basics about lead paint in the class.
There is an encapsulant that we are allowed to use, but it's not a paint. By "we" I mean licensed lead paint abatement companies, not a regular contractor even after taking the RRP class, the RRP class doesn't allow you to delead. The encapsulant can only be used on certain components and the component has to be tested first, it needs to be applied to a specific thickness, and I need to keep special paperwork for 7 years if I encapsulate anything.
The RRP training is very important and I'd strongly recommend you take the class. Even the show on HGTV called Bargain Mansions got jammed up over it and had to pay over $66,000 in fines ...
Growing Days, LLC (KS/MO), whose owner, Tamara Day, hosts HGTV’s Bargain Mansions television show, entered into a settlement to resolve alleged Renovation, Repair and Painting (RRP) Rule violations depicted on the show. After observing violations on the television show, EPA conducted on-site inspections and compliance monitoring activities. The settlement was conditioned upon the company’s performance of several projects to promote broader awareness of and compliance with the RRP Rule. The projects included creation of an RRP instructional video, to be posted on the company’s website and blog, and linked to its social media platforms, thereby reaching a large audience of potential future home renovators. EPA also obtained settlements with the following contractors associated with the Bargain Mansions show: Homoly and Associates, Inc. (MO), Open Door Homes, Inc. (KS/MO); Next Generation Construction, LLC (KS); Remco Demolition, LLC (KS/MO); and KC Demo, Inc. (MO). Collectively, the businesses associated with the Bargain Mansions show, including Growing Days LLC, paid $66,287 in penalties to settle alleged violations for improper renovations related to the show.
Thank you @Jonathan R McLaughlin. Yes, I need to get a decent lawyer and realtor who will do what they are supposed to do, watch out for their client's interest.
Thank you @Derreck Wells for sharing your expertise and educating us.
@Derreck Wells based on your story about the show, most contractors and investors aren’t hiring lead guys. No wonder you’re preaching it so hard! Sure scares me... I wouldn’t want to have anything to do with a house before 1980’s just to play it safe. Doesn’t a professional renter sue you for anything from mold, to an offsized stair anyways? Maybe people should invest more in vetting tenets because in today’s world, you just can’t keep up with it all. It really gets crazy if you applied all the EPA, OSHA, LDS, BLM, LGBTQ, CRT, Local code, new code, green standards, new wiring and outlet standards and apply them to these older houses. They’re all condemned. Some areas that’s all there is. It’s just not a good time to be running a business right now because of all the things people will do to take you to court. Hard to be a landlord and make the dollars work. I know someone who can though............... Black...... Rock and associates!
@Tinah Canda I just signed new leases with all my tenants due to a legal issue and my new lease requires me to give them all a Lead Paint Disclosure from the federal government and to have them sign a waiver stating that they received the Lead Paint Disclosure. I will then provide them with copies of the lease and the disclosure.
However if your state law requires you to have the lead paint abated for renting I’d follow the advice of trying to get the Seller to split the cost with you.
@Alecia Loveless EVERY lease requires you to give the Lead Paint disclosure and sign the waiver. That's Federal law. That landlord I mentioned in NH above was fined $26,000 for not giving those to 1 tenant. If you haven't given them to other tenants, I'd suggest you do so immediately before you get jammed up over them.
This guy in PA was fined $84,000 for not giving them...
"Muhammad Ashraf (PA) paid a penalty of $84,000 to settle alleged Lead Disclosure Rule (LDR) violations related to six residential lease agreements. The alleged violations included failure to comply with LDR requirements to provide prospective tenants an EPA-approved lead hazard information pamphlet, a required Lead Warning Statement, and an appropriate statement disclosing knowledge of the presence of lead-based paint and/or lead-based paint hazards. A city referred this case to EPA because a child with a high elevated blood-lead level resided in one of the rental properties."
And this 73 year old landlord is still in court for not giving them to a tenant. https://www.justice.gov/usao-mdpa/pr/northumberland-county-man-charged-violating-toxic-substance-control-act
@Account Closed The RRP isn't about removing lead paint. It's "Renovation, Repair, and Painting" and even plumbers need to have the certification because they drill through painted walls. Every contractor in every field in the country is supposed to take the class and get the certification. Plumbers, electricians, painters, framers, handymen, and anyone else that gets paid to work in someone's house... including you. Basically it tells contractors that if they're going to be disturbing paint in a house built before 1978, they need to set up containment as if there is lead paint, even if that's just drilling a hole in the wall, OR they need to use a specific lead test kit and then they can set up lesser containment (but they still need containment because the store bought test kits aren't like the X-ray guns the inspectors use). This company in MA got find $50,000 and is on probation for 5 years because they didn't follow RRP rules, and then lied about it and faked the documents we are all supposed to keep (including YOU if you're billing yourself a contractor). https://www.justice.gov/usao-ct/pr/house-painting-company-illegally-removed-lead-paint-sentenced
You really need to go to https://www.epa.gov/lead and learn about the laws and what you're required to do as a contractor to get your RRP cert. Note, the RRP cert DOES NOT allow you to delead in any capacity. It just teaches you how to safely work with the lead paint in houses and how not to get fined like the examples I've mentioned in this thread.