Effect of failure to comply with lead-based paint disclosure requirements

QUESTION: My seller client recently entered into a contract on her older home. Unfortunately, I hadn’t uploaded the Lead-Based Paint Addendum (Form 2A9-T) and the Protect Your Family from Lead in Your Home brochure into the MLS before the buyer made their offer, which was made “sight unseen.” As a result, the Addendum was not included with the offer, the check box in paragraph 7(b) of the Offer to Purchase and Contract (Form 2-T) where the seller indicates if the property was built before 1978 was left blank by the buyer/buyer agent, and neither the seller nor I caught it. The buyer is now claiming that the seller is in breach of contract and is demanding a refund of his $10,000.00 Due Diligence because the seller didn’t comply with the lead-based paint disclosure requirements.

Is the buyer entitled to terminate the contract? What are the penalties for non-compliance with the lead-based paint disclosure law? The seller has no knowledge of lead-based paint in the home and has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in the home.

ANSWER: The Residential Lead-Based Paint Hazard Reduction Act was enacted by Congress in 1992, and regulations were implemented in 1996. The section of the Act addressing lead-based paint disclosure is 42 USC 4852d. Subsection (c) specifically provides that nothing in Section 4852d “shall affect the validity or enforceability of any sale or contract for the purchase and sale or lease of any interest in residential real property.” Based on our reading of this provision, as well as the fact that neither the Contract nor the Addendum specifically gives a buyer the right to terminate the contract based on the seller’s non-compliance with the lead-based paint disclosure requirements, we think the answer to your first question is “no.”

However, in response to your second question, the potential penalties for non-compliance with the Act are significant, and should be taken into consideration in determining an appropriate response to the buyer’s demand. HUD and EPA have the authority to impose monetary penalties of up to $16,000 on any seller, landlord, or agent who knowingly violates the lead-based paint disclosure requirements. A buyer or tenant may also sue the violator for an amount equal to three times their actual damages and may be awarded attorneys’ fees. Agents involved in a transaction are personally required to ensure compliance with the disclosure requirements, and this obligation extends to buyer agents unless they are paid by the buyer. An agent could also be subject to discipline by the Real Estate Commission for failing to comply with the disclosure requirements. For these reasons, it is very important that both listing agents and buyer agents take care to ensure that prospective buyers of homes built before 1978 receive a completed Form 2A9-T and a Protect Your Family from Lead in Your Home brochure (available in zipForms) before any contract becomes effective.