New real estate investors who either want to flip or rent properties often lack the funds to buy expensive homes, so they are inclined to look for less expensive ones. One way to find a more affordable alternative is to look for an older home. But these homes are often fraught with problems, such as outdated floor plans, small bedrooms, closets and bathrooms, and older electrical, plumbing, or heating and air systems.
And then there’s that pesky lead based paint problem…
Prior to 1978, 38 million U.S. homes contained lead-based paint on both the exterior and interior walls. Before 1940, 87% of the homes built in the U.S. had lead-based paint. From 1940-1960, the percentage declined to 69%, and between 1960-1978, the percentage dropped off to 24%. In 1978, the use of lead in paint in residential properties was banned.
For decades, very few people realized that the lead could be a problem to human health, but in the 1970s, a disorder called Pica began to be recognized in young children. Pica occurs when a young child eats a substance like paint and ingests toxins such as lead that can cause learning disabilities and brain damage. Children under six can also develop behavioral problems from lead exposure.
As the medical community became more aware of this disorder, the Environmental Protection Agency (EPA) began to mandate that landlords and sellers of homes built prior to 1978 submit a one page form to potential buyers or tenants to disclose that lead based paint may be present in the home. As part of that requirement, sellers and landlords were also required to provide an EPA brochure called “Protect Your Family from Lead In Your Home,” which is available at www.epa.gov.
This was a simple process, and very few buyers or tenants ever refused to live in a home because of this issue. But everything changed in 2010 when the EPA created the Renovation, Repair and Painting Program (RRP), a new law designed to toughen the rules that investors and contractors must follow when rehabbing pre-1978 properties.
- PA’s Lead Renovation, Repair and Painting Rule (RRP Rule) requires that firms performing renovation, repair, and painting projects that disturb lead-based paint in homes, child care facilities and pre-schools built before 1978 have their firm certified by EPA (or an EPA authorized state), use certified renovators who are trained by EPA-approved training providers and follow lead-safe work practices.
The EPA states that lead is not just harmful to young children, but also to pregnant women—and all adults in general. Therefore, this new RRP law applies to everyone who works on pre-1978 homes, including contractors, property owners, maintenance staff, etc. and includes the typical work done to renovate properties, such as painting, carpentry, electrical, plumbing, window replacement, kitchen and bath replacements, etc. Disturbing more than six square feet of interior painted surfaces, or more than 20 square feet of exterior painted surfaces requires approval.
The whole idea behind RRP is that when lead dust is disturbed during a renovation, it goes into the air and all around the home, and can create health problems for the individuals who live there.
Individuals or companies who work on these homes must now be certified in an 8 hour, one-day training program that is available in most metropolitan areas. These classes can cost $300-$550, depending on the type of certification. When the certification expires, a four-hour refresher course is also necessary.
The EPA offers a 24 page PDF that you can download from their website called “The Lead-Safe Certified Guide to Renovate Right.” Renovators must provide this booklet to any occupants of a property where such work is to be conducted.
If you already own a pre-1978 property, or are considering buying one, you can also have the property inspected by a certified risk assessor to determine whether or not any lead hazards are present.
Doing renovations to minimize lead-contaminated dust which follow the policies and guidelines under RRP are more time consuming, difficult, and expensive. A journal of all the work performed must be maintained. There are specific cleaning protocols that must be followed.
Failure to follow the rules and guidelines of the RRP laws can lead to heavy fines for the landlord, flipper, or renovation firms. The fines can be as much as $37,500 per day.
Cautionary tales abound. A company in Massachusetts paid a $30,000 penalty for not doing pre-renovation education and violating record-keeping requirements. In April, 2014, four New England firms were fined from $2200 to $30,000 for doing renovations that violated RRP laws. Before that, two firms in Maine paid fines totaling $14,455 to settle allegations for not following the RRP guidelines. Even Lowes, the major home remodeling store, was fined for work they performed.
If you are buying a pre-1978 home to occupy as your primary residence, the RRP laws do not apply to you. However, please consider that at some point you may choose to move out and rent the property, making you responsible to follow the same laws and guidelines.
I have heard many investors debate the merits or lack of merit of the RRP laws. But regardless of the merits, the bottom line as investors is do we really need all of this red tape, extra expense, and potential for fines? The easiest way to avoid all of this is simply not to buy properties built prior to 1978. If you do that, there are no RRP rules required. That’s my best advice on how to avoid the headache.
For more information on the RRP law, you can call the National Lead Information Center at 1-800-424-LEAD (5323), or go to www.epa.gov.
Ethan Roberts is a real estate writer, editor and investor. He’s a frequent contributor to InvestorPlace.com, and his work has been featured on Money.msn.com, Reuters.com and Auction.com. He’s also written for SeekingAlpha.com and MarketGreenhouse.com, and was one of five contributing editors to TheTycoonReport.com. He’s been investing in real estate since 1995 and has been a Realtor since 1998. He also teaches classes on investing in residential real estate.