Property Management Companies Beware – New Risk of Liability Related to Lead-Based Paint in Pre-1978 Housing

Environmental Justice is a key priority of the Biden Administration and, included in that priority, is addressing the risks presented by lead exposure.[1]  The risks of lead-exposure are well-known and addressing these risks has transcended both Democratic and Republican administrations.  Elevated blood lead levels are known to impact neurological development.  In children, lead poisoning damages the nervous system and causes developmental and behavioral problems that can affect them for their lifetime. In adults, lead poisoning causes health and reproductive problems. Pregnant women are especially vulnerable to the effects of lead.[2]  Although lead-based paint was banned in 1978 and its use in other products has been significantly curtailed, many believe that the presence of lead in the environment continues to pose significant risks to susceptible populations.

In October 2021, EPA issued the “Draft Strategy to Reduce Lead Exposures and Disparities in U.S Communities” (Draft Strategy).  The Draft Strategy calls for a multi-prong approach to reduce lead exposure in impacted communities.[3]  The Draft Strategy cuts across numerous EPA programs and calls for a “whole-of-government” approach to meet its goals, including increased coordination with other agencies such as Department of Housing and Urban Development (HUD), the Food and Drug Administration (FDA) and the Consumer Product Safety Commission (CPSC).  The Draft Strategy’s goal of “reducing community exposure to lead sources” calls for actions such as reducing lead in drinking water through the replacement of lead pipes and tightening the standards for lead and copper in drinking water; protecting communities in rental and other housing through increased enforcement of lead-safe work practice standards and revising the lead clearance levels for lead-paint abatement and the definition of lead-based paint; and protecting the larger community through cleaning up Superfund and other lead-contaminated sites and increasing the stringency of air emission standards for lead.

The public comment period for the Draft Strategy ended on March 16, 2022.  EPA is reviewing the comments, with plans to finalize the document within the coming months.  However, the agency is already in the process of pursing the goals outlined in the Draft Strategy.  For example, the Bipartisan Infrastructure Law commits $15 billion to replace lead pipes in communities across the country.  The Bipartisan Infrastructure Law also commits $1 billion to address 49 Superfund sites that have been backlogged, including several with lead contamination.  Beyond these larger, more visible actions, EPA is also pursuing the Draft Strategy’s goals through tweaking its long-standing guidance materials regarding the Lead Renovation, Repair and Paint (RRP) Rule.  By removing two questions from its 2010 Lead-Based Paint Program Frequent Questions Guidance (RRP Guidance), EPA signals its intention to hold property management companies to the same liability standards as contractors performing lead renovation, repair and painting work if the circumstances indicate that both entities performed or offered to perform renovations for compensation in pre-1978 housing.[4]

What is the Lead Renovation, Repair and Painting (RRP) Rule?

In 1977, the CPSC passed regulations prohibiting the use of lead-containing paints for products manufactured after February 27, 1978.  The Toxic Substances Control Act (TSCA) Section IV gives EPA authority to regulate contamination from lead-based paint used prior to the 1978 ban. Section 402 of TSCA requires the EPA Administrator to promulgate regulations imposing training and certification requirements on individuals conducing lead-based paint activities in housing constructed prior to 1978.[5]  The RRP Rule was promulgated in 2008 to protect residents of pre-1978 homes from lead-based paint disturbed during renovation, repair, or painting activities.[6]  The RRP Rule establishes training, certification, information distribution, and work practice requirements for firms who “perform, offer, or claim to perform” renovations, repair, and painting projects that disturb lead-based paint in homes, child care facilities and pre-schools built before 1978.  The RRP Rule requires such firms be certified by the EPA and utilize workers trained in lead-safe work practices; distribute safety information to residents prior to the work; and document their compliance with the Rule.    

What was the previous guidance? 

EPA published the RRP Guidance in 2010 in an effort to help the public understand and comply with the RRP Rule.  The RRP Guidance presented numerous frequent questions and answers regarding the RRP Rule, including compliance obligations of Property Management Companies (PMCs).  In general, EPA took the position that PMCs would not be required to obtain certification under the RRP Rule and that EPA would not look to the PMC for liability if they hired a certified firm for the work and were not performing the work itself.[7]  EPA viewed PMCs as being similar to landlords and, provided that the PMC or its employees, were not “doing the work,” the PMC would not be required to obtain certification.

How is the guidance being changed and why?

On November 1, 2021, EPA published a Notice for public comment in the Federal Register indicating its intent to withdraw the two questions regarding PMC compliance with the RRP Rule.   In this Notice, EPA explains that, in the past 10 years since the RRP Rule was promulgated, EPA has a better understanding of work undertaken by PMCs and no longer want to make “categorical assumptions” about PMC responsibilities and liability.  EPA has concluded that PMCs are less like a landlord and more like a contractor hired to perform services at a property.  EPA states that it has found many cases where the PMC and its employees perform the work itself under its property management service contract or where the PMC was hiring uncertified contractors to conduct the RRP activities.  The withdrawal of these questions indicates EPA’s intention to hold both the PMCs and the contractors they hire responsible for compliance if the circumstances indicate that both entities performed or offered to perform renovations for compensation in target housing or child-occupied facilities. Significantly, the Notice indicates that the following activities may demonstrate that a PMC has performed, offered to performed or claimed to perform RRP potentially may be considered  to “perform, offer, or claim to perform”  RRP activities if it undertakes the following types of activities: soliciting and evaluating contractor bids; applying for permits; granting contractors access to the property; overseeing contractor work on the property; informing tenants of renovation activity; verifying completion of renovation activity; and remitting payment to contractors.

On January 21, 2022, EPA announced that it would proceed on its decision to withdraw the two questions.  The supporting Memorandum signed by EPA Administrator Michael Regan states that EPA had reviewed the comments received and such review had not changed EPA’s position regarding withdrawal of the two questions.[8]  The Agency  provided further explanation for the laundry list of activities identified above.  EPA explained that these activities are merely “illustrative examples of activities that some PMCs do, and the EPA did not purport or intend to reach any legal conclusion about these activities, such as whether or not they constitute performing or offering to perform a renovation.”  EPA stated that it would continue to consider the facts and circumstances of each individual repair, renovation or painting project.  The withdrawal will occur on March 22, 2022.  

Why this matters?

  • Potential Liability for Failure to Comply.  First, and most important, this action by EPA matters to PMCs that manage pre-1978 rental housing.  Violations of the requirements could expose PMCs to significant fines.  For example, Home Depot was fined $20.7 million in 2020 for long-standing violations of the RRP Rule.  In 2018, Magnolia Homes, of HGTV “Fixer Upper” fame, was fined $40,000 and paid $160,000 to abate lead-based paint hazards in the Waco, TX area.  A general review of fines through the past five years appear to have ranged, in most cases, between $10,000 to $50,000.[9]
  • Potential expansion of RRP Rule.  This  narrow tweaking of the guidance only impacts a narrow class of people, – PMC for pre-1978 rental housing.  However, it demonstrates that EPA is taking a closer look at persons that may engage in regulated RRP activities.  For example, one of the commenters in response to the Notice to revise the RRP Rule, suggested that the certification and other RRP requirements should be extended to realtors who contract for renovation, repair and painting in target housing.
  • Application of RRP Rule to Commercial Buildings.  The Draft Strategy indicates that EPA is continuing to evaluate risk from renovations of public and commercial buildings pursuant to TSCA §402(c)(3), which directs EPA to promulgate regulations for renovations in commercial buildings that create lead-based paint hazards.  EPA has been working on a potential rule for commercial buildings since 2010 and has yet to finish its analysis of whether a rule is needed.  The Draft Strategy indicates that there may be movement on this issue and, if so, PMCs for commercial buildings could come under new regulatory requirements.
  • More Lead Standards Upcoming.  On May 4, 2021, the 9th Circuit Court of Appeals ruled that EPA had violated TSCA with regard to its dust-lead hazard and soil-lead hazard standards and failure to update the definition of lead-based paint, all of which have been the subject to regulatory action, inaction and challenges over the past 30 years.  Notably, the 9th Circuit held that factors of cost, scientific uncertainty, lack of information, efficacy and feasibility cannot be considered in setting standards – health risk is the only applicable consideration. The Draft Guidance indicates that EPA is currently working on these standards  as well as an update to the definition of lead-based paint. If EPA acts on the Court’s admonitions, it is likely that the hazard standards become more stringent, increasing costs of compliance. In addition, paint currently is considered “lead-based paint” if it contains .5% lead by weight.  It is anticipated that this percentage is likely to decrease and thus expand the universe of properties considered to contain lead-based paint.
  • Misplaced Reliance on Guidance Materials. Who could have expected that such a “tweak” of long-standing guidance materials could have such wide impacts?  In reality, everyone should always expect that.  “Guidance” is non-binding and even if it has been around for years, it doesn’t mean that EPA can’t change its mind to meet its current political initiatives.  In the current political climate, one should tread warily when relying on guidance regarding ambiguous or uncertain regulatory obligations where an overburdened community may be involved. 

[1]See Biden-Harris Lead Pipe and Paint Action Plan (December 2021).  Lead exposure may result from numerous sources, including homes, schools, childcare facilities, and other buildings with lead-based paint, old water distribution systems and household plumbing, and lead-contaminated soils in yards, parks and school grounds.

[2] See EPA Guidance Document, Steps to Lead Safe Renovation, Repair and Painting (March 2021). 

[3]The Draft Strategy proposes the following goals: (1) Reduce community exposures to lead sources;  (2) Identify communities with high lead exposures and improve their health outcomes; (3) Communicate more effectively with stakeholders –parents, families, and childcare providers in impacted communities; and (4) Support and conduct critical research to inform efforts to reduce lead exposures and related health risks, which will be implanted through three approaches: (1) Reduce lead exposures locally with a focus on communities with disparities and promote environmental justice; (2) Reduce lead exposures nationally through protective standards, analytical tools, and outreach; and (3) Reduce lead exposures with a “whole of EPA” and “whole of government” approach.  

[5] EPA estimates that about half the homes constructed prior to 1978 contain lead-based paint.

[6] See 40 C.F.R. §§ 745.80 – 745.92.  The RPP Rule went into effect on April 22, 2010.

[7] See  RRP Guidance at FQ 23002–13650 and FQ 23002–18348. 

[8] Comments were received from three PMC-related trade organizations opposing the change and two environmental organizations and one private contractor supporting the change.  Notably, although the PMCs oppose the change, there is some indication that the contractors welcome this change. See Property Owners Share Lead Paint Safety Responsibility | PaintMag

[9] Further, many of the commenters to the Draft Strategy, including a coalition of 19 states, called for EPA to increase enforcement of all requirements regarding lead-based paint.  These 19 states included California, Massachusetts, Pennsylvania, Delaware, Connecticut, Hawaii, Iowa, Maine, Maryland, Michigan, Minnesota, New Mexico, North Carolina, Oregon, Rhode Island, Vermont and Wisconsin.

 

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