Daily Development for Monday, January 24, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

LANDLORD/TENANT; LANDLORD'S RESPONSIBILITY FOR CONDITION OF PREMISES; FEDERAL LEAD PAINT LAW: New York federal court rules that LeadBased Paint Act imposed disclosure requirements even prior to effective date of HUD regulations.

Sweet v. Sheahan, 1999 WL 1011921 (N.D.N.Y. 11/5/99)

In the Federal LeadBased Paint Act, Congress directed HUD to develop regulations providing for disclosure of the environmental risk of leadbased paint to certain tenants and purchasers of "target housing." The Act required that the regulations become effective no later than October 28, 1995, and, pursuant to that directive, HUD promulgated proposed Regulations on November 2, 1994, with the statement that the "disclosure requirements set forth in the regulations "shall apply to any transaction to sell or lease target housing on or after October 28, 1995."

As is the nature of federal regulatory processes, however, HUD did not publish final regulations in this area until March 6, 1996, and the disclosure requirements set forth in these regulations did not become effective, according to the terms of the regulations, until December 6, 1996 (September 6, 1996 for single family homes).

Plaintiff in the instant case alleged damages for violations of the statutory disclosure requirements in a lease entered into prior to the effective date of the HUD regulations, but three days after October 28, 1995 date that Congress originally specified as the date HUD was supposed to issue them.

Here, the court denied a summary judgment motion for defendant, stating that HUD had no power to make law inconsistent with Congressional action, and that the Lead Paint Act "expressly and unambiguously stated that the disclosure regulations shall take effect' on October 28, 1995." The court stated that "the effective date set forth in the [HUD] regulations, which contravenes the clear will of Congress, cannot be enforced." Consequently, the landlord's failure to provide notice of lead paint dangers to this tenant directly violated the LeadBased Paint Act and was actionable under the Act.

The court stressed that HUD's function with regard to these rules was merely "interpretive," and not "legislative." HUD's duty was only to "report and explain want Congress has done." The court also alluded to the statutory statements of purpose to stress that Congress saw an emergency situation and the timing of the HUD response was critical.

Defendants argued that it was inappropriate to apply the regulations retroactively. But the court responded that it was not applying the regulations at all, but rather the "rights and obligations" of the parties that arose under the Lead Paint Act itself. The court was willing to grant that Congress did not intend that its statutory policies about lead paint become law instantly upon the effective date of the Act, but concluded nevertheless that the Congressional intent was that these policies would become effective as of the date it instructed HUD to promulgate final regulations.

The court states, without citing any language in the Act, that the Lead Based Paint Act "specifically set forth the specific conduct required of sellers and lessors, and stated that such conduct would be required on and after October 28, 1995."

Comment 1: In the words of a broker who sent this case to the editor: "EEEEK!!" The case would substantially expand the range of liability for violations of the act to a period when many, if not all, institutions doing business covered by the proposed regulations assumed that the were not covered. If they had geared up to comply with supposed requirements under the Act, and HUD later developed new and different requirement standards, at worst there would have been significant economic waste and massive confusion in the compliance efforts.

Comment 2: But what happens now? Don't we have the same situation? If courts following this opinion impose compliance responsibilities upon landowners and land sellers, will they adopt "federal law" standards based upon the Act alone? If so, will these standards be different than those eventually enacted by HUD? Will they, in the alternative, simply retroactively impose the HUD regulations? Will they impose the proposed regulations? What does all this mean for parties subject to future regulatory requirements?

The editor says all this without himself studying the language of the statute. If it in fact is exactly consistent with what HUD ultimately required, then some of the concerns will go away.

Comment 3: The bottom line, however, is that Congress did *not* say that certain disclosures were required as of 1995. Rather, Congress said that HUD would develop regulations by that date. To push the consequences of HUD's failure to comply onto the regulated parties seems both unjust and inconsistent with Congressional intent. If Congress indeed perceived an emergency here requiring immediate disclosure rules, it knew how to say that. Apparently it didn't. All we can hope for is that the Second Circuit will realize the error of the trial court here.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named “Brokerdirt.” But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/