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Lead Based Liability: Timing is Key

By:
Aug 26, 2016

Disclosures

Background: You are approached by a client who has purchased a house built in 1950, and who intends to tear it down to build a new house on the land. At the time of contract ratification, the seller had not provided disclosure of lead-based paint on the property. Your client now wants to know if he can get out of the contract because the seller failed to provide the necessary lead-based paint disclosures.
Can either party get out of the transaction if there has been a failure to disclose?

No. The law states that the disclosure must occur before ratification of the contract, and failure to disclose lead-based paint will not affect the validity of the contract.
What can a buyer do if the seller fails to disclose lead-based paint?

If the seller has failed to disclose lead-based paint and the house was built before 1978, the only remedy available to the buyer is to sue for damages. The law does allow the buyer to sue for triple the amount of actual damages, as well as attorney fees if the buyer prevails.
At what point in the transaction must the existence of lead-based paint be disclosed?

The law requires that the seller disclose the existence of lead-based paint before the buyer becomes obligated to execute the contract. This does not mean that the seller must inform every person who expresses interest in the house of the existence of lead-based paint, but it does mean that after a buyer has submitted a written offer, the seller must provide notice of lead-based paint before ratifying the contract.
As the agent, can I be liable if my client does not disclose the existence of lead-based paint? If so, for how much?

Yes, as the agent, you can potentially be liable if your client does not provide the buyer with the necessary notice. If you know of any lead-based paint on the property, or fail to inform the sellers of their obligation to disclose the existence of lead-based paint, you could be liable for the same amount of damages as your client.

In addition to being liable for monetary damages in a law suit, you could be in violation of the Code of Ethics. As the seller’s agent, if you do not inform your client of the duty to disclose, you could be found to be in violation of Article 1, in that you are not protecting the interests of your client, who may be subject to a law suit. You may also be in violation of Article 2 if you know of the existence of lead-based paint on the property. As the buyer’s agent, you could also be in violation of Article 1 if you do not let your client know that the house was built before 1978 and that there might be lead-based paint on the property.
What are my responsibilities, as the listing agent, if the house was built before 1978?

As the listing agent, you must ensure compliance with the law. This means that you must inform the sellers of their obligations and make sure that either the seller or you personally complete all required activities. The law requires that the seller inform an agent of any known lead-based paint on the property. If you have informed the sellers of their obligations, you will not be responsible for information withheld by your clients.
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