Lead paint: what the regulators are up to.

Lead is one of those substances that is as vilified today as it was marveled at in years gone by. Sometimes it's hard to believe there was a time when every batch of top-quality paint started with 50 pounds or so of "high-quality" lead. Makers of pipes, solder, gasoline, and glass also used lead in their products without question. For people in these industries, lead improved their products, and that's all that counted.

As these benefits were largely overshadowed by concerns over adverse health effects, lead-based paint became an emotional issue that has generated myriad Federal, State and local rules and regulations. It appears much of the governmental activity is based upon questionable science and is often unpredictable and self-contradictory. A year or two ago, the Federal Centers for Disease Control reported that childhood lead poisoning declined 96 percent during the 1980's, and that lead levels in the adult population declined 77 percent during the same period. Both trends are being attributed to the removal of lead from gasoline. The estimated percentage of children with elevated blood levels nationwide has declined to one-half of 1 percent in some studies. To the extent elevated lead levels remain a problem, it is primarily in inner city children who live in areas where lead deposits from old gasoline emissions can still be found in soils and dust.

But rather than celebrate this tremendous progress in the fight against childhood lead poisoning, lead-based paint has come under renewed scrutiny. Officially, the use of lead in paint was banned in 1978, but in 1992 Congress passed Title X, which mandates Federal actions by the Department of Housing and Urban Development, Environmental Protection Agency and Occupational Safety and Health Administration in an effort to reduce the threat posed by old in-place leaded paints. Various state and local activities have supplemented the Federal regulatory effort.

The latest is that regulations proposed jointly in November 1994 by EPA and HUD mandating disclosures of lead-based paint in the sale or lease of any residential structure built before 1978 are about to be finalized in the very near future. These rules, which will take effect six months later, will unfortunately not relieve the seller or lessor from any liability he or she may have for personal injury under applicable law. As with a building code, compliance may satisfy the regulators, but it does not serve as a shield against litigation.

However, here are some steps builders, owners, managers and home improvement contractors can follow to prepare for the new mandates:

Builders, Owners and Managers

* Start collecting any available information on known lead-based paint hazards in your existing units. This information will have to be disclosed to tenants once the new HUD/EPA rules go into effect.

* Obtain copies of the EPA's lead-pamphlet and the required Federal disclosure forms as soon as they are available.

* Start educating your sales and leasing personnel as to what these new rules will require of them and how it will affect the business. For sales personnel, focus on the 10-day "re-negotiation" period that will be required by the new Federal rules.

Home Improvement Contractors and Renovation Contractors

* Obtain copies of EPA's lead pamphlet and become familiar with it. You will probably have to start giving these out to your customers when the new Federal rules go into effect.

* If you do a lot of work in buildings which may contain lead-based paint, become familiar with the air lead testing requirements mandated by OSHA. You may wish to inquire as to what types of "objective data" the local OSHA office will accept in lieu of actual on-site testing. If you don't want to contact OSHA directly, you may belong to a trade association that would look into this.

* Upgrade your worker training program to place more emphasis on the lead-based paint situation. Also, keep an eye on the EPA's activities in this area, and on any resulting state legislative mandates. Training and certification will be a major issue over the next few years.

New York City has two sets of enforcement schemes. HPD is charged with enforcing Local Law 1, which requires abatement of lead-based paint (i) in any building constructed before 1960; (ii) where a child under age seven lives; and (iii) where the paint is chipping or peeling. Thus, a violation of Local Law 1 does not require proof of any elevated blood lead levels in the children who occupy the unit.

HPD generally considers wet scraping and re-painting to be an acceptable method of abatement. This policy has generated considerable litigation, most of which has resulted in the judicial conclusion that paint is not an acceptable encapsulant. But HPD has maintained its policy, and has technically been in contempt of court for some time. Several City Council bills and proposed regulations have been drafted in an effort to resolve this situation. One set of rules proposed by HPD last fall would continue to allow wet scraping and re-painting of lead-based paint that is chipping or peeling, but require that intact surfaces be covered with sheetrock. If adopted, these rules would create the ultimate irony by making it more expensive to treat less hazardous intact surfaces than the truly dangerous ones. At a cost of $1,500-$2,000 per unit, sheetrocking all of New York City's two million housing units could cost $30-$40 billion.

HPD shares jurisdiction with the City Health Department, which is charged with following up on reports of elevated blood levels in children. But unlike HPD, the Health Department will not accept any amount of encapsulation on walls containing lead-based paint. In its view, leaded surfaces must be covered with new drywall or removed completely, even if there isn't any evidence of peeling paint. (Wet scraping and painting are allowed on ceilings.) The Health Department's enforcement record has generated numerous "horror stories" from owners who have been forced to perform major demolition and rebuilding work after a single blood test showed that a child occupying the unit had a blood lead level that exceeded some questionable standard.

For the rest of society, here are a few side effects of the lead paint problem that do not appear to be getting the attention they deserve:

* The Adverse Impact on Affordable Housing: Lead-based paint is no longer an issue in new construction, but it is a very real one for those seeking to create affordable housing by renovating existing buddings for single-family, condominium, cooperative or other forms of ownership. In New York City, two agencies - HPD and the City Health Department - can show up at any time and order an abatement program that may range from simple re-painting to complete demolition of all walls within a unit (and potentially an entire building). The more drastic the required abatement, the more expensive it will be and the more costs will be passed along to the purchasers of the units.

* Maintenance and operation costs: With the cost of gutting many units running into the multiple tens of thousands of dollars, building maintenance budgets don't stand a chance if the wrong city lead inspector shows up. In apartment buildings not subject to rent control or stabilization, unforeseen maintenance costs can still be passed on to tenants. In rent-controlled or stabilized units, the landlord must absorb these costs.

* Abandonment: Owners of marginal buildings may not even take the trouble of doing the required work. If the building is in bad enough shape, a lead abatement order may be all the owner needs to abandon it entirely and let the bank (or the city) deal with the problem. This is where slums and crackhouses come from.

* Insurance costs: Much of the litigation in the lead paint area involves suits by tenants (or groups of tenants) against landlords for allegedly subjecting their children to lead paint hazards. Landlords who turn to their insurance companies are often met with coverage denials, and another round of litigation often results. Although many state courts have upheld denials in these situations, the highest courts in Maryland and Massachusetts have ordered insurance companies to cover these types of claims. In the Maryland case, decided in November, the court held that lead paint was not the type of hazard contemplated by the "pollution exclusion" in a standard Allstate homeowners policy. Over time, the insurance companies can be expected to re-write these exclusions to cover lead paint lawsuits - and charge additional premiums for specific endorsements that would nullify the exclusion.

Mr. Lee is managing partner of Lee & Amtzis LLP, a Staten Island-based law firm which represents builders and owners in the New York area. He is also Chairman of the Board of the Building Industry Association of New York City, an organization of low-rise homebuilders.