City's new lead paint law will set industry back years.

2003 ended with a bang (not in the good sense) as it relates to the real estate industry.

On the local legislative front, we saw many attacks upon the industry, the most notable the new bill on lead paint.

When local law 38 was overturned by the Court of Appeals on a technicality in mid-2003, pressure was brought on the City Council to pass a more stringent bill that would place the burden for childhood poisoning on property owners without any consideration of other factors that may be the cause of the problem.

While the advocates deny it, this bill was a product of the trial lawyers who have everything to gain from a law that removes all defenses.

Intro. 101a, supported by Council Speaker Gifford Miller and 38 other members, creates a huge liability for owners both from a legal perspective and a financial one.

Contained in this bill is a presumption that in a building built before 1960, where a child under seven years of age resides, any peeling paint is presumed to be lead paint. As a result, where a child is lead poisoned, the presumption means, in effect, that there is lead in the building and the owner is thus liable for all damages and abatement work.

At press time, the Mayor rightly vetoed this bill, citing its high cost (more than $250 million for the city alone) and unreasonableness.

While that appears to be good news, Speaker Miller has told me that the Council will override the veto in the next session (currently scheduled for Feb 4.)

While we fought this matter every step of the way, it was clear from the beginning that the Council was going forward with its plan.

This bill, when it becomes law, will set the residential real estate industry back years. It focuses on dwelling units and common areas in buildings built before 1960. Owner occupied cooperatives and condominiums are exempt--but common areas in these buildings are covered.

The owner is required to correct a lead based paint hazard which is defined as "any condition in a dwelling or dwelling unit that causes exposure to lead from lead-contaminated dust, from lead paint that is peeling, or from lead based paint that is present on chewable surfaces, deteriorated sub-surfaces, friction surfaces, or impact surfaces that would result in adverse human health effects."

An owner has the obligation to investigate in any apartment in a pre- 1960 building occupied by a child seven years of age or under and in common areas for all of the conditions that might create a lead paint hazard. These investigations are required a least once a year.

The hitch in all of this is the notice requirement that tenants must provide regarding the presence of a child seven years or younger. Each lease or renewal lease must contain a rider approved by the New York City Department of Health in which a tenant is required to inform the owner whether a child under seven years of age resides in the apartment or will reside. Each year between January 1 and 16, the owner is also required to give an annual notice to each tenant to determine whether a child resides with the tenant.

Where the tenant does not respond, the owner is required to "conduct an investigation in order to make that determination." Where the owner is still unable gain access by March 1, the owner is obligated to inform DOH of that circumstance. Local Law 38, the predecessor law, did not require of this. Also, while local law 38 required the owner to give the tenants an annual notice to tenants whether a child was present, an owner's duty ended if the tenant did not respond.

The new law contains a presumption that peeling paint in any building with three or more units built prior to January 1, 1960, is presumed to be lead paint--the same presumption under Local Law 38, except that the age of a child residing in the unit was increased from six to seven, increasing the covered population.

The aforementioned presumption creates the following situation; a child under the age of seven, residing in a pre 1960 apartment is diagnosed as lead poisoned and is reported to the Department of Health. HPD then issues a lead paint violation that the landlord must correct. However, there is no lead paint hazard in the apartment. That is, there is no dust, no friction surfaces that bind, no peeling paint--everything is intact. Yet, because the apartment was not totally renovated and all vestiges of lead paint removed, the presumption is that the child's poisoning was a result of living in that unit.

Unless there was such rehab, there is no defense for the owner. There is no accounting for other sources of lead paint, i.e., schools, playgrounds, residency in other countries etc,--the liability falls on the owners, clearly within the parameters of strict liability theory.

Submitting tests or sampling results accompanied by sworn statements can only rebut the presumption. The testing may only be performed by a person who has been certified as an inspector or risk assessor in accordance with federal requirements.

There are also requirements for work practices that must be employed during remediation. Under the law the Department of Housing, Preservation and Development (HPD) is required to promulgate rules establishing work practices for situations where an owner is performing work to correct a lead paint violation.

When the work involves more than 100 square feet, the law requires that the work practices "shall be no less stringent" than the standards required by the Department of Health when there is a DOH order to abate a lead hazard. In addition, the law provides that "Such rules shall provide for temporary relocation provided by the owner of the occupants of a dwelling or dwelling unit to appropriate housing when work cannot be performed safely."

This is one of the more onerous aspects logistically of the law, since there is an assumption that tenants will want to readily relocate and that the owners have other units available to relocate them. If the owner has no other property they may have no choice but to put them in a hotel or motel for the duration. Does anyone really believe that tenants will cooperate?

One cannot begin to fathom the harm that this law is going to cause. Insurance costs, already skyrocketing, will go even higher, since the Council has now created an almost absolute liability standard for owners. And this assumes that lead will not be excluded from coverage as a risk covered.

Those financing rehabilitations of older properties may retreat from this market, since the risks associated with ownership are too great.

I also predict that with rising costs and increased liability, we may return to the 1970's and 80's era of housing abandonment. Just when the city's in-rem program has been all but eliminated, the Council has created a vehicle to jump start it. I wonder how willing they will be to fund this in the future.

Additionally, the little noticed provision in the law that requires the same remediation standards for one or two family homes on turnover should generate excitement in the smaller residential communities of the city. While the law deals with those homes that are not owner occupied, i.e., when a home is rented to non-owners, it is unclear what "on turnover" means. Does it mean that when an owner sells the building they must re-mediate it at the same level as a multiple dwelling; for example remove all friction surfaces, peeling paint etc.?

I also predict that families with children under the age of seven are going to find it more difficult to find housing in pre-1960 buildings. While we are all aware of fair housing requirements, people will start looking for ways to avoid renting to this group. Can you blame them?

While the law does not take effect until six months after its enactment (meaning early August), there is very little owners can do in that time frame to mitigate its impact. There are many other areas of this bill that warrant discussion, but it would require dedication of at least half this paper's edition.

All the industry associations have fought this legislation and will continue to explore avenues to lessen the impact.

ABO will be developing information sessions in the future to help owners better understand the law.

FOOTNOTE: Local Law 38--the law that was overturned on a technicality and replaced by Intro 101A--was a law that was practical and rational and resulted in a seventy per cent reduction in child lead poisoning cases--in just three years! To quote columnist Cindy Adams "ONLY IN NEW YORK KIDS, ONLY IN NEW YORK."