[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 9064-9088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5243]




[[Page 9063]]

_______________________________________________________________________

Part VIII





Department of Housing and Urban Development

Environmental Protection Agency





_______________________________________________________________________



24 CFR Part 35



40 CFR Part 745



Lead; Requirements for Disclosure of Known Lead-Based Paint and/or 
Lead-Based Paint Hazards in Housing; Final Rule

  Federal Register / Vol. 61, No. 45 / Wednesday, March 6, 1996 / Rules 
and Regulations   

[[Page 9064]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 35

RIN 2501-AB58

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 745

[OPPTS-62130A; FRL-5347-9]
RIN 2070-AC75


Lead; Requirements for Disclosure of Known Lead-Based Paint and/
or Lead-Based Paint Hazards in Housing

Agencies: Department of Housing and Urban Development (HUD) and the 
Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: As a result of past Federal, State, and local efforts to 
reduce lead in the environment, the percentage of children with 
elevated levels of lead in their blood has declined considerably over 
the last 20 years. Approximately 1.7 million children, however, still 
have blood-lead levels high enough to raise health concerns. Studies 
suggest that lead exposure from deteriorated residential lead-based 
paint, contaminated soil, and lead in dust are among the major existing 
sources of lead exposure among children in the United States. Section 
1018 of the Residential Lead-Based Paint Hazard Reduction Act of 1992 
directs EPA and HUD to jointly issue regulations requiring disclosure 
of known lead-based paint and/or lead-based paint hazards by persons 
selling or leasing housing constructed before the phaseout of 
residential lead-based paint use in 1978. Under that authority, EPA and 
HUD are establishing the following requirements: (1) Sellers and 
lessors of most residential housing built before 1978 must disclose the 
presence of known lead-based paint and/or lead-based paint hazards in 
the housing; (2) sellers and lessors must provide purchasers and 
lessees with any available records or reports pertaining to the 
presence of lead-based paint and/or lead-based paint hazards; (3) 
sellers and lessors must provide purchasers and lessees with a 
federally approved lead hazard information pamphlet; (4) sellers must 
provide purchasers with a 10-day opportunity to conduct a risk 
assessment or inspection for the presence of lead-based paint and/or 
lead-based paint hazards before the purchaser is obligated under any 
purchase contract; (5) sales and leasing contracts must include certain 
disclosure and acknowledgment language; and (6) agents must ensure 
compliance with these requirements. These provisions ensure that 
families receive both specific information on the housing's lead 
history and general information on lead exposure prevention. With this 
information, consumers can make more informed decisions concerning home 
purchase, lease, and maintenance to protect their families from lead 
hazard exposure.

DATES: Effective date: March 6, 1996 except for 24 CFR 35.88, 35.90, 
35.92, and 35.94 and 40 CFR 745.107, 745.110, 745.113, and 745.115 
which contain information collection requirements that have not been 
approved by OMB. Once OMB has approved these information collection 
requirements, EPA and HUD will publish a document giving notice of the 
effective date and adding the OMB approval number to 24 CFR part 35 and 
40 CFR part 9.
    The requirements in this final rule are applicable in the following 
manner: (1) For owners of more than four residential dwellings, the 
requirements are applicable on September 6, 1996 and (2) For owners of 
one to four residential dwellings, the requirements are applicable on 
December 6, 1996.

FOR FURTHER INFORMATION CONTACT: For general information or to obtain 
copies of the final rule, pamphlet, or background materials, contact 
the National Lead Information Clearinghouse (NLIC), toll free, at (800) 
424-LEAD or fax requests to the NLIC at (202) 659-1192. Copies of the 
final rule, a brief question-and-answer document, and the pamphlet 
Protect Your Family From Lead In Your Home, are available on the 
Internet at the National Safety Council's gopher at cais.com and on the 
World Wide Web at http://www.nsc.org/nsc/ehc/ehc.html. For technical 
information: At HUD, contact Conrad C. Arnolts, Office of Lead-Based 
Paint Abatement and Poisoning Prevention, Department of Housing and 
Urban Development, 451 7th St., SW., Washington, DC 20410, Telephone: 
(202) 755-1810, E-mail: [email protected] (use underscore 
characters), or John B. Shumway, Office of General Counsel, Telephone: 
(202) 708-9988, E-mail: John--B.--S[email protected] (use underscore 
characters). Persons who are hearing impaired may access these 
telephone numbers by calling the Federal Information Relay Service at 
1-800-877-TDDY.
    At EPA, contact Charles Franklin, Chemical Management Division, 
Office of Pollution Prevention and Toxics, Environmental Protection 
Agency, 401 M St., SW., Washington, DC 20460, Telephone: (202) 260-
1781, E-mail: [email protected].
    For general information or to obtain copies of the final rule, 
pamphlet, or background materials, contact the National Lead 
Information Clearinghouse (NLIC), toll free, at (800) 424-LEAD or fax 
requests to the NLIC at (202) 659-1192.
    Copies of the final rule, a brief question-and-answer document, and 
the pamphlet Protect Your Family From Lead In Your Home, are available 
on the Internet at the National Safety Council's gopher at cais.com and 
on the World Wide Web at http://www.nsc.org/nsc/ehc/ehc.html.

SUPPLEMENTARY INFORMATION:

I. Authority

    This final rule is issued under the authority of section 1018 of 
the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 
U.S.C. 4852d). The Residential Lead-Based Paint Hazard Reduction Act is 
Title X of the Housing and Community Development Act of 1992, Pub. L. 
102-550.

II. Background

A. Legal Background

    Congress passed the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (hereafter referred to as Title X or the Act) to address 
the need to control exposure to lead-based paint hazards. In addition 
to amending the Toxic Substances Control Act (TSCA) and the Lead-Based 
Paint Poisoning Prevention Act (LBPPPA), Title X established the 
infrastructure and standards necessary to reduce lead-based paint 
hazards in housing. Within this law, Congress recognized lead poisoning 
as a particular threat to children under age 6 and emphasized the needs 
of this vulnerable population (section 1003 of Title X).
    Section 1018 of Title X requires EPA and HUD to promulgate joint 
regulations for disclosure of any known lead-based paint or any known 
lead-based paint hazards in target housing offered for sale or lease. 
(Target housing is defined in section 1004(27) of Title X, section 
401(17) of TSCA, and is discussed in Unit IV.C. of this preamble.) 
Specifically, section 1018 requires the following activities before a 
purchaser or lessee is obligated under a contract to purchase or lease 
target housing: (1) Sellers and lessors must provide purchasers and 
lessees with a lead hazard information pamphlet, as developed under 
section 406(a) of TSCA; (2) sellers and lessors must 

[[Page 9065]]
disclose the presence of known lead-based paint and/or lead-based paint 
hazards in such housing and provide purchasers and lessees with any 
lead hazard evaluation report available to the seller or lessor; (3) 
sellers must permit purchasers a 10-day opportunity to conduct a risk 
assessment or inspection for the presence of lead-based paint hazards; 
and (4) sales contracts must include an attached Lead Warning Statement 
and acknowledgment, signed by the purchaser.
    Violation of section 1018 may result in civil and criminal 
penalties and potential triple damages in a private civil suit.
    Section 1018 mandated that EPA and HUD promulgate these 
requirements no later than 2 years after the date of enactment of Title 
X (October 28, 1994), to take effect 3 years after enactment of Title X 
(October 28, 1995). Due to promulgation delays, EPA and HUD have 
revised the effective date provisions for this rule.
    This rule represents one of a broad range of interrelated lead 
exposure reduction activities mandated under Title X. Many of these 
other activities support and affect the development of the section 1018 
rule. Several of the activities most closely related to the disclosure 
requirements are briefly discussed below.
    The statutory provision most closely tied to section 1018 is 
section 406(a) of TSCA. Section 406(a) directs EPA to develop and 
publish, after notice and comment, a lead hazard information pamphlet 
on lead-based paint hazards in the home. EPA developed the pamphlet in 
consultation with HUD, the Centers for Disease Control and Prevention 
(CDC), and the Consumer Product Safety Commission (CPSC), which has 
joined as a co-sponsor of the pamphlet. EPA issued a notice of 
availability in the Federal Register of August 1, 1995 (60 FR 39167), 
to announce the pamphlet's completion. As mandated under section 1018 
of Title X, this lead hazard information pamphlet must be given to 
purchasers and lessees of target housing.
    Under section 403 of TSCA, EPA is charged with issuing regulations 
that identify lead-based paint hazards, lead-contaminated dust, and 
lead-contaminated soil, based on the definitions provided in section 
401 of TSCA. In July 1994, EPA released an interim guidance document to 
provide public and private decisionmakers with guidance on identifying 
and prioritizing lead-based paint hazards for control before the 
issuance of the final section 403 standards. EPA subsequently issued 
the interim guidance document in the Federal Register of September 11, 
1995 (60 FR 47248). EPA is in the process of developing the proposed 
section 403 standards.
    Section 402 of TSCA directs EPA (in consultation with HUD, the 
Department of Labor (DOL), and the Department of Health and Human 
Services (HHS)) to promulgate regulations on accreditation of training 
programs and training and certification of individuals and contractors 
engaging in lead-based paint evaluation and reduction activities. This 
section also requires that EPA, in consultation with the above 
agencies, develop standards for performance of such lead-based paint 
evaluation and reduction activities. EPA issued the proposed section 
402 rule on September 2, 1994 (59 FR 45872), and expects to issue the 
final rule shortly. Under the section 1018 disclosure requirements 
issued today, available reports resulting from such evaluation and 
reduction activities must be provided to the purchaser or lessee.
    Pursuant to sections 1012 and 1013 of Title X, HUD is drafting 
regulations setting out procedures for all federally owned residential 
property and housing receiving Federal assistance. These procedures 
concern occupant notification as well as evaluation (such as inspection 
and risk assessment) and reduction (such as interim controls and 
abatement) of lead-based paint and/or lead-based paint hazards. The 
regulations implementing sections 1012 and 1013 will not address the 
provision of a lead hazard information pamphlet to new purchasers and 
lessees of target housing, nor any of the other requirements under 
section 1018. HUD will release these regulations in proposed form as 
soon as possible for public comment.
    Pursuant to section 1015 of Title X, HUD and EPA established a Task 
Force on Lead-Based Paint Hazard Reduction and Financing, made up of 
private and public organizations representing the spectrum of interests 
affected by the lead-based paint issue. The Task Force developed 
recommendations on evaluating and reducing lead-based paint hazards in 
private housing. The Task Force released its recommendations on July 
11, 1995, in a report entitled Putting the Pieces Together: Controlling 
Lead Hazards in the Nation's Housing. A copy of this report has been 
entered into the public record for this rule.
    Pursuant to section 1017 of Title X, HUD and EPA, in cooperation 
with other Federal Agencies, have revised HUD's guidelines for lead-
based paint hazard evaluation and reduction activities. These revised 
guidelines, entitled Guidelines for the Evaluation and Control of Lead-
Based Paint Hazards in Housing (hereafter referred to as the ``HUD 
Guidelines''), were released to the public in June 1995. A copy of the 
HUD Guidelines is included in the public record for this rule.

B. Lead Poisoning in the United States

    Lead affects virtually every system of the body. While it is 
harmful to individuals of all ages, lead exposure can be especially 
damaging to children, fetuses, and women of childbearing age. As recent 
studies have identified previously unrecognized effects, there has been 
increasing concern about blood-lead levels once thought to be safe. 
Since 1978, CDC has lowered the blood-lead level of concern from 60 
g/dL (micrograms per deciliter) to 10 g/dL (Ref. 2).
    Lead poisoning has been called ``the silent disease'' because its 
effects may occur gradually and imperceptibly, often showing no obvious 
symptoms. Blood-lead levels as low as 10 g/dL have been 
associated with learning disabilities, growth impairment, permanent 
hearing and visual impairment, and other damage to the brain and 
nervous system. In large doses, lead exposure can cause brain damage, 
convulsions, and even death. Lead exposure before or during pregnancy 
can also alter fetal development and cause miscarriages.
    In 1991, the Secretary of HHS characterized lead poisoning as the 
``number one environmental threat to the health of children in the 
United States'' (Ref. 1). Although the percentage of children with 
elevated blood-lead levels has declined over the last 20 years, 
millions of U.S. children still have blood-lead levels high enough to 
threaten their health (Ref. 1). The Third National Health and Nutrition 
Examination Survey (NHANES III) indicates that over the past two 
decades, the average child's blood-lead level has decreased from 12.8 
g/dL to 2.8 g/dL (Ref. 8). NHANES III also indicates, 
however, that in 1991 approximately 1.7 million U.S. children under the 
age of 6 still had blood-lead levels that exceeded the CDC 10 
g/dL level of concern (Ref. 8).

C. Hazards from Past Uses of Lead-Based Paint

    Efforts to reduce exposure to lead from sources like gasoline and 
food cans have played a large role in the past reductions of blood-lead 
levels in the United States. Despite these successes, a significant 
human health hazard remains from improperly managed lead-based paint. 
From the turn of the 

[[Page 9066]]
century through the 1940's, paint manufacturers used lead as a primary 
ingredient in many oil-based interior and exterior house paints. Usage 
gradually decreased through the 1950's and 1960's, as largely lead-free 
latex paints became more popular. Although the CPSC banned lead-based 
paints from residential use in 1978 (currently, paints may not have 
greater than 0.06 percent lead by weight (Ref. 3)), EPA and HUD 
estimate that 83 percent of the privately owned housing units built in 
the United States before 1980 contain some lead-based paint. By these 
estimations, approximately 64 million homes may contain lead-based 
paint that may pose a hazard to the occupants if not managed properly 
(Ref. 4).
    Lead from exterior house paint can flake off or leach into the soil 
around the outside of a home, contaminating children's playing areas. 
Dust caused during normal lead-based paint wear (especially around 
windows and doors) can create a hard-to-see film over surfaces in a 
house. In some cases, cleaning and renovation activities can increase 
the threat of lead-based paint exposure by dispersing fine lead dust 
particles in the air and over accessible household surfaces. If managed 
improperly, both adults and children can receive hazardous exposures by 
inhaling the fine dust or by ingesting paint dust during hand-to-mouth 
activities. Children under age 6 are especially susceptible to lead 
poisoning (Ref. 2).

III. Summary of Proposed Rule and Public Comments

    Under the authority of Title X, EPA and HUD issued a proposed rule 
in the Federal Register of November 2, 1994 (59 FR 54984). The proposed 
rule described the basic approach for implementing the requirements 
under section 1018, including draft regulatory text, definitions, and 
standardized form language for use in all transactions. In many cases, 
EPA and HUD also included a range of options for implementing the rule 
along with requests for comment on specific implementation issues.
    In response to the proposed rule, identified by docket number 
OPPTS-62130A, EPA and HUD received responses from 198 commenters during 
the 60-day comment period. The largest number of responses 
(approximately 25 percent) came from the real estate industry. Other 
commenter groups included representatives from the banking/financial 
industry (9 percent), letters from State and local officials involved 
with public health or environmental protection (8 percent), comments 
from advocacy groups (8 percent), letters from attorneys representing 
various groups (9 percent), and concerned private citizens (23 
percent). Approximately 10 percent of the responses came from education 
officials, housing authorities, and groups involved with real estate 
development and construction. The paragraphs that follow briefly 
describe some of the key areas that were addressed by the commenters.
    A number of comments addressed the scope and applicability of the 
rule. Commenters discussed a range of transaction types for specific 
exclusion or inclusion.
    While numerous comments addressed the various definitions contained 
in the rule, most suggestions involved revisions and modifications to 
existing terms as opposed to requests that additional terms be defined. 
A prevalent theme was consistency of terminology across different rules 
such as those for sections 402, 404, and 406 of TSCA.
    Comments concerning the disclosure requirement targeted issues such 
as the scope of disclosed information; the precise stage at which 
disclosures should be made; recordkeeping parameters; and the ways in 
which common areas of multi-unit buildings will be affected by 
disclosure.
    The lead hazard information pamphlet requirements generated 
comments in the following three categories: strategies for States and 
tribes (hereafter, all references to States include Indian tribes) with 
their own notification materials; making the pamphlet available in 
other languages; and requests for more varied and active distribution 
strategies.
    The proposed disclosure and acknowledgment form generated requests 
for simplification and availability in non-English languages. Some 
suggestions involved revising portions of the Lead Warning Statement.
    The section of the proposed rule that received the most comments 
concerned the proposed 10-day evaluation period. Of particular concern 
were the commencement and length of the evaluation period; the 
practical availability of certified inspectors or risk assessors to do 
the testing; and the practicality and logistics of obligating 
purchasers to provide a report to sellers.
    Other topics that elicited some comment included the role of the 
agent, the effective date of the rule, and potential penalties for 
noncompliance.
    A more complete summary of the comments received, along with EPA's 
and HUD's responses, is available in the public record for this 
rulemaking.

IV. Final Rule Provisions and Key Comments Addressed

    EPA and HUD have revised the proposed rule to reflect the Agencies' 
desire to maximize the rule's clarity, flexibility, consistency with 
other Federal activities, and consistency with existing real estate 
practice. These goals are important considerations to ensure quick and 
widespread implementation of the rule.
    In particular, many of the changes to the final rule fall into five 
general categories. These areas include: (1) Clarifications of the 
rule's applicability, (2) modification of key definitions, (3) 
establishment of a clear and common sense disclosure process, (4) 
development of a concise disclosure record, and (5) development of a 
flexible framework for the 10-day evaluation period.
    Throughout the preamble for this final rule, there are citations to 
24 CFR part 35 and 40 CFR part 745. These references reflect the 
location that the final regulatory text will occupy in the Code of 
Federal Regulations (CFR) following the rule's promulgation. EPA and 
HUD are adding this final joint EPA/HUD regulation to both titles to 
ensure that the public can easily locate the requirements. Where the 
preamble references the actual rule language, therefore, it will 
regularly include references to the requirements as they appear in each 
title. While the requirements are identical, in some cases the 
nomenclature for the two titles may be slightly different.

A. Clarifying the Rule's Scope and Applicability

    Section 1018 mandated that the rule apply to sales and leases of 
target housing. The proposed rule also discussed certain unique types 
of housing transactions that deserved special attention in implementing 
the regulations. For example, the preamble of the proposed rule 
explained the rule's exclusion of the following from the statutory 
definition of target housing: housing built after 1977, housing for the 
elderly, housing for the disabled, 0-bedroom dwellings, and commercial 
lodging. Many commenters recommended that the regulatory text of the 
final rule clearly designate types of transactions that are included 
and excluded.
    EPA and HUD have expanded the scope and applicability section of 
the regulatory text to better define the rule's impact on certain types 
of transactions. Below is a brief discussion of the unique transactions 
addressed under the scope and applicability section and the 

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rationale for including or excluding them.
    1. Transactions to sell properties at foreclosure. The final rule 
retains the exclusion for foreclosure sales presented in the proposed 
rule. While some commenters opposed exempting foreclosure transactions 
due to the lack of protection for the purchaser, EPA and HUD believe 
that the circumstances typically surrounding foreclosure transactions 
make pre-sale disclosure and evaluation unworkable and impractical. 
Access to properties during foreclosure proceedings is often limited, 
making evaluations impossible. Such properties typically are sold on an 
``as is'' basis with regard to all structural and environmental 
factors. Further, these transactions do not necessarily involve direct 
interaction between the property owner and the purchaser, and the 
mortgage holder or trustee is unlikely to have information on the 
presence of lead-based paint and/or lead-based paint hazards. In light 
of these circumstances, EPA and HUD believe that it would be 
inappropriate to extend Federal disclosure and evaluation requirements 
to foreclosure transactions.
    This exclusion does not apply, however, to the sale of housing 
originally acquired through a foreclosure sale and subsequently resold 
(an expansion of the exclusion recommended by some commenters). In such 
cases, EPA and HUD believe that the rule's provisions can be 
incorporated into the sales process since many of the extenuating 
circumstances of foreclosure sales no longer apply.
    2. Rental housing found to be free of lead-based paint. The final 
rule exempts from coverage leasing transactions involving target 
housing that is free of lead-based paint, as determined by a certified 
inspector. For the purposes of this rule, EPA and HUD have defined 
``lead-based paint free'' as the absence of paint with lead levels 
above those provided in Title X.
    In addition to receiving support by many public commenters, this 
exclusion was recommended by the Task Force on Lead Hazard Reduction 
and Financing. EPA and HUD strongly encourage the concept of lead-based 
paint evaluation in rental housing. Evaluations can help lessors to 
detect the presence of lead-based paint and to determine whether 
certain management practices and occupant education efforts are 
necessary. Where evaluations discover lead-based paint, such results 
will provide lessors and/or lessees with the information necessary to 
take appropriate hazard reduction steps. EPA and HUD also believe that 
the exemption will provide a valuable incentive to building owners to 
conduct inspections and remove lead-based paint where present.
    Under the provisions of the regulation, disclosure during rental 
transactions is limited to the disclosure of known lead-based paint 
and/or lead-based paint hazards, provision of available records and 
reports, provision of a lead hazard information pamphlet, and creation 
and retention of lead warning and acknowledgment language. These 
activities provide substantially fewer benefits in cases where reliable 
information indicates that the housing is lead-based paint free. At the 
same time, EPA and HUD expect that the exemption for lead-based paint 
free units will not dissuade many lessors from providing their 
inspection reports to prospective lessees on a voluntary basis. Given 
the value that lead-safe housing would have to an informed consumer, 
EPA and HUD expect that owners will see a great benefit in informing 
lessees of the housing's lead-based paint free status.
    Because of the distinct disclosure obligations the statute imposes 
on sellers, obligations that purchasers assume upon purchase of the 
housing, EPA and HUD are not allowing the lead-based paint free 
exemption for sales transactions. Unlike lessees, purchasers take on 
new obligations to comply with the disclosure provisions during all 
subsequent sales or leasing transactions. Exempting sales transactions 
could disrupt the flow of information from owner to owner regarding the 
status of the target housing and the purchaser's potential disclosure 
obligations. Further, Title X guarantees purchasers more than just 
known information and available reports. Title X guarantees each 
purchaser the opportunity to conduct an evaluation for lead-based paint 
and/or lead-based paint hazards, regardless of the information 
disclosed by the seller. Exempting sales transactions based on the 
information in the possession of the seller would deny the purchaser 
that evaluation right. While many purchasers will accept the seller's 
information and waive their evaluation opportunity (especially if the 
seller provides an evaluation by a certified inspector), some 
purchasers may prefer to have their own evaluation performed.
    Because the Federal training and certification program will not 
take effect until some time after the effective date of this rule, EPA 
and HUD recognize the need for a process to allow property owners to 
seek exclusions for lead-based paint free housing in States without 
federally authorized certification programs. In the interim period 
before the Federal certification program (to be issued under subpart L 
of 40 CFR part 745) takes effect, inspectors qualified under any 
existing State certification program, and using State-approved methods, 
are considered qualified to conduct inspections for the purpose of 
determining whether housing is lead-based paint free. In States without 
existing certification programs, lessors may use the services of 
inspectors certified in other States. Once the Federal or federally 
authorized State certification program has taken effect in a particular 
State, however, this interim provision will expire and subsequent 
inspections for the purposes of this exclusion will have to be 
performed by inspectors with Federal or federally authorized State 
certification.
    Some commenters asked whether lessors hoping to meet the lead-free 
exemption could correct for possible false (or outdated) positive 
findings during lead-based paint inspections. The lessor always retains 
the option of having additional tests performed by certified 
inspectors. Nothing in either the law or the regulation is intended to 
revoke or restrict that right. An additional test can sometimes clarify 
whether or not lead-based paint is present. For example, if a lessor 
believed that a previous inspection had rendered a false-positive 
result (all measurement techniques involve some small degree of 
sampling and analytical error), the lessor could choose to have a 
certified inspector retest the area in question. If the additional 
testing by a certified inspector indicated that the initial positive 
results were false (i.e., that there was in fact no lead-based paint 
present), then the lessor would qualify for the lead-based paint free 
exemption. Similarly, suppose a lessor first had a test done in 1982 
using an X-ray fluorescence (XRF) device that indicated the presence of 
lead-based paint. Because testing procedures were less reliable at that 
time (standard practice often failed to consider the effect of the 
substrate underneath the paint on the accuracy of the measurement and 
instrument calibration checks were often deficient), the lessor might 
choose to conduct a new test using the improved methodology available 
today. If this second test indicated that lead-based paint was not 
present, then the lessor would qualify for the lead-based paint free 
exemption. As a third example, a lessor who had all lead-based paint 
removed from a rental property following an earlier inspection could 
choose to have a new inspection or 

[[Page 9068]]
clearance examination conducted on the abated property. If the new 
information indicated that lead-based paint was no longer present, then 
the lessor would qualify for the lead-based paint free exemption. In 
all three cases, if the second test confirmed the original findings, or 
if the test was not conducted by a certified inspector, the exemption 
would not be available.
    3. Short-term leases of 100 days or less. Many commenters 
recommended that the final rule clarify the distinction between short-
term lodgings and longer term residential housing. The final rule 
addresses these comments by excluding housing transactions involving 
leasing agreements of 100 days or less, where no lease renewal or 
extension can occur. This time period is intended to capture all 
leasing transactions of 3 months or less, while providing several 
additional days to allow flexibility in the transaction. Building upon 
the logic discussed in the proposed rule, the final rule's short-term 
lease exclusion captures most seasonal vacation rentals and hotel and 
motel transactions, as well as other forms of short-term lodging. 
During such transactions, which are typified by short stays and quick 
occupant turnover, EPA and HUD believe that the disclosure provisions 
are impractical and counter to Congressional intent. The notification 
requirements of this rule would apply to vacation rentals in cases 
where the stay extends beyond a 100-day period. Under such 
circumstances, EPA and HUD believe that the potential for occupant 
exposure to lead-based paint and/or lead-based paint hazards merits the 
disclosure of information required by the rule, regardless of whether 
the stated purpose of the lease is temporary or permanent housing.
    In addition, EPA and HUD have placed a limitation on extensions and 
renewals of such short-term leases to ensure that month-to-month 
leasing transactions remain covered by the final rule. Commenters noted 
that many rental transactions incorporate an open-ended month-to-month 
leasing agreement. These transactions will still be covered by the 
final rule unless the parties establish in advance that the term of 
rental will be no longer than 100 days. In an open-ended month-to-month 
lease arrangement, for example, the rule still applies since the 
leasing agreement fails to limit the lease term to 100 days or less, 
i.e., the lease agreement could possibly be extended beyond 100 days. 
If both parties wish to extend a previously exempted short-term lease 
beyond the 100-day limit, all provisions of this rule must be satisfied 
in full before any such ``extension'' occurs.
    4. Lease renewals. The final rule does not require repeated 
disclosure during the renewal of existing leases in which the lessor 
has previously disclosed all information required under 24 CFR 35.88 
and 40 CFR 745.107 and where no new information has come into the 
possession of the lessor. As stated in the proposed rule, EPA and HUD 
do not believe that duplicative disclosure provides significant 
benefits.
    Several commenters noted that in many residential leasing 
transactions, leasing arrangements switch to month-to-month ``at-will'' 
arrangements after an initial period of occupancy. In such cases, the 
leasing arrangement may continue indefinitely without any ``renewal 
process.'' Under such circumstances, EPA and HUD interpret renewal to 
occur at the point when the parties agree to a significant written 
change in the terms of the lease, such as a rental rate adjustment. 
Following such alteration of terms, the disclosure requirements apply 
to any new information obtained subsequent to the original disclosure.
    5. The purchase, sale, or servicing of mortgages. The final rule 
does not cover, and was never intended to cover, the purchase, sale, or 
servicing of mortgages. During the comment period, many commenters 
expressed concern that the proposed rule could be interpreted to hold 
liable persons involved in the purchase, sale, or servicing of 
mortgages where the title of the housing does not change hands as part 
of the transaction.
    6. The sale or lease of 0-bedroom dwellings. The final rule does 
not apply to transactions involving 0-bedroom dwellings, in keeping 
with the definition of ``target housing'' provided in section 1004 of 
Title X. This definition, at the heart of the section 1018 provisions, 
specifically excludes 0-bedroom dwellings of all types.
    7. Informal rental agreements. In the proposed rule, EPA and HUD 
proposed excluding ``informal rental agreements which do not involve a 
lease'' (a phrase meant to capture oral leases) because ``such 
arrangements, by virtue of their informality, make the administration 
and enforcement of these requirements extremely difficult.'' EPA and 
HUD have removed any implied exclusion for oral leases. In deciding not 
to exclude such leases, EPA and HUD drew heavily upon the public 
comments. Many of these comments suggested that the absence of a 
written lease may not have bearing on the ``formality'' of the housing 
arrangement. Commenters noted that oral leases make up a significant 
portion of the housing arrangements in certain areas, especially those 
that lack rental housing codes.
    Further, although the absence of a written lease provides 
challenges for certain Federal enforcement and compliance monitoring 
approaches, EPA and HUD now believe that enforcement is possible. Other 
evidence may exist, for example, to demonstrate that a leasing 
agreement exists between two parties. Congress also provided lessees 
with opportunities for redress under its civil penalty provisions at 
section 1018(b)(3). These safeguards are not dependent upon Agency 
actions and therefore should not be constrained by EPA and HUD 
limitations.
    EPA and HUD have also considered policy reasons for not excluding 
oral leases. First, EPA and HUD are sympathetic to commenter concerns 
that an explicit exclusion for oral leasing transactions could create 
incentives for lessors to avoid written leases. If the rule's exclusion 
were to indirectly discourage the use of written leases, lessees would 
lose both their right to information on lead-based paint poisoning 
prevention and the many other protections afforded by written leases. 
Commenters also noted that a disproportionate number of oral 
transactions occur in low-income, disadvantaged communities. These 
communities are already at greater risk of exposure to lead-based paint 
hazards.
    Nevertheless, while the final rule does not provide an explicit 
exclusion for oral leasing arrangements, EPA and HUD expect that many 
oral lease transactions may be excluded for other reasons (length of 
arrangements, rental of 0-bedroom dwelling, etc.).

B. Effective Date

    In the proposed rule, EPA and HUD requested comment on the issue of 
extending the effective date for the final rule beyond October 28, 
1995, in light of the promulgation delays. EPA and HUD noted Congress' 
inclusion of a 1-year window between the statutory promulgation 
deadline and the statutorily mandated effective deadline. EPA and HUD 
received comments in support of and in opposition to an extension.
    Commenters opposed to delaying the effective date generally argued 
that any delay in implementation would increase the number of 
preventable exposures to lead-based paint hazards. According to these 
commenters, given the importance of educating consumers about their 
options for reducing lead hazards, the positive effects of early 
implementation outweigh the practical difficulties.
    While agreeing that this rule addresses an important consumer 

[[Page 9069]]
    protection and empowerment goal, EPA and HUD believe that the rule's 
effective implementation requires an informed and prepared general 
public and regulated community. EPA and HUD believe that a phase-in 
period is necessary to provide adequate time for the real estate 
industry, private lessors, and independent housing sellers and lessors 
to become familiar with the rule requirements and to set up procedures 
for compliance.
    Sellers and lessors who own more than four residential dwellings 
will have 6 months from the final rule's promulgation to implement full 
disclosure during sales and leasing transactions. This phase-in 
schedule ensures that all such property owners, sellers, lessors, and 
agents will have adequate notice of the new requirements before they 
take effect. Believing that property owners with four or fewer 
dwellings are more likely to be non-professional sellers and lessors, 
EPA and HUD are providing a 9-month phase-in period for such owners. 
EPA and HUD encourage all sellers and lessors to begin voluntary 
disclosure in advance of their relevant effective date.
    EPA and HUD also received comments recommending delaying the 
effective date until after EPA issues its standards for lead hazards in 
paint, dust, and soil. These commenters stated that the regulated 
community would be unable to disclose adequately the presence of lead-
based paint and lead-based paint hazards in the absence of Federal 
standards.
    EPA and HUD do not believe that this rule requires Federal lead 
hazard standards to be effective. In section 1018, Congress mandated 
that sellers and lessors disclose not just lead-based paint hazards but 
also the presence of lead-based paint, a far more inclusive mandate 
(since not all lead-based paint is necessarily a hazard).
    Further, EPA and HUD expect that records will likely provide 
purchasers and lessees with information on lead-based paint and, where 
they exist, lead-based paint hazards. Accordingly, if records 
pertaining to lead-based paint are fully disclosed, disclosure of lead-
based paint hazards should also be accomplished.
    The statute and now this rule provide a clear definition for the 
levels of lead in paint that constitute lead-based paint. The statute 
also provides a qualitative definition of lead-based paint hazard, 
including certain exposures to lead-based paint that is peeling or 
chipping; lead-based paint that is on friction, impact, or chewable 
surfaces; and lead-contaminated dust and soil.
    EPA and HUD have augmented these definitions by providing guidance 
on identifying lead hazards in paint, dust, and soil (60 FR 47248).
    Regarding the need for guidance to help prospective purchasers and 
lessees with the interpretation of disclosed information, EPA and HUD 
believe that the statutory definition of ``lead-based paint hazard,'' 
combined with EPA's lead hazard guidance and the HUD Guidelines, 
provides sellers, purchasers, lessors, and lessees with valuable 
information for interpreting any disclosed information.
    Some commenters have also recommended delaying the effective date 
of the final rule until after the activation of the Federal standards 
for training and certifying lead workers, being developed under section 
402 of TSCA. After considering the comments and reexamining the 
statute, EPA and HUD have determined that such a delay is unnecessary. 
EPA and HUD believe that the HUD Guidelines will provide adequate 
interim guidance for the evaluation and management of lead-based paint 
hazards in target housing, prior to the release of the section 402 
training and certification standards.

C. Definitions

    EPA and HUD received comments on many of the proposed definitions. 
Below is a brief discussion of the significant definitions being 
promulgated under this final rule.
    1. Agent means any party who enters into a contract with a seller 
or lessor, including any party who enters into a contract with a 
representative of the seller or lessor, for the purpose of selling or 
leasing target housing. This term does not apply to purchasers or any 
purchaser's representative who receives all compensation from the 
purchaser.
    EPA and HUD initially defined ``agent'' to be ``any party who 
enters into a contract with a seller or lessor to represent the seller 
or lessor for the purpose of selling or leasing target housing.'' 
Several commenters stated that the language in this definition was 
needlessly vague. Listing agents typically enter into a contract with 
the seller and represent the seller. ``Buyer'' agents, however, often 
enter into a contractual relationship with a seller or the seller's 
agent but may represent both the seller and the purchaser in the real 
estate transaction. EPA and HUD have revised this definition so that 
any party entering into a contractual relationship directly with the 
seller or lessor (or indirectly with a representative of the seller or 
lessor) for the purpose of selling or leasing the target housing, is an 
``agent'' for the purposes of this rule. As a consequence, listing 
agents, selling agents, and buyer agents (if paid by the seller or 
through a cooperative brokerage agreement with the listing agent), are 
``agents'' and are responsible for ensuring compliance under the rule. 
Since section 1018 refers only to agents having entered into a contract 
with the seller or lessor, buyer's agents paid entirely by the 
purchaser are not considered ``agents'' under this rule.
    2. Available means in the seller's or lessor's possession or 
reasonably obtainable by the seller or lessor at the time of the 
disclosure.
    Section 1018(a)(1) requires that sellers and lessors provide the 
purchasers and lessees with ``any lead hazard evaluation reports 
available to the seller or lessor.'' EPA and HUD interpret available 
lead hazard evaluation reports to mean records and reports that pertain 
to lead-based paint and/or lead-based paint hazards in the target 
housing and that are in the possession of the seller or lessor or that 
are reasonably obtainable by the seller or lessor at the time of the 
disclosure.
    EPA and HUD expect that most sellers and lessors will retain copies 
of relevant information in their possession along with other important 
housing files (title, outstanding leases, etc.). In some cases, 
however, the seller or lessor may no longer have possession of the 
records but may have reasonable access to the information. Examples of 
``reasonably obtainable'' records include records retained by a 
separate or outside entity on behalf of the seller or lessor and copies 
of reports retained by the original inspector or risk assessor that 
would be available to the owner in cases where the original records 
were destroyed or lost. The term ``reasonably obtainable'' is not 
intended to impose an obligation on the seller or lessor to conduct 
further evaluation of the housing.
    3. Common area means a portion of a building generally accessible 
to all residents/users including, but not limited to, hallways, 
stairways, laundry and recreational rooms, playgrounds, community 
centers, and boundary fences.
    This definition is unchanged from the proposed rule. The term 
``common area'' will be used in other TSCA Title IV regulations, some 
of which may require a broader interpretation of common area. The final 
rule provides one broadly interpreted term applicable under all of the 
TSCA rules, to avoid the confusion of multiple rule-specific 
definitions. Though several commenters recommended minor changes to 
adjust the scope of the definition, EPA and HUD believe that other 
regulatory 

[[Page 9070]]
provisions adequately clarify the relevant scope of the term ``common 
area'' as it relates to target housing.
    4. Foreclosure means any of the various methods, statutory or 
otherwise, known in different jurisdictions, of enforcing payment of a 
debt, by the taking and selling of real property.
    EPA and HUD added this definition in response to requests that the 
final rule include a regulatory definition of the term. EPA and HUD 
believe that this definition will help property owners determine the 
applicability of the foreclosure exemption to their transactions. 
Recognizing that different jurisdictions may have differing 
interpretations of what constitutes ``foreclosure,'' EPA and HUD have 
developed a general definition that provides flexibility to work within 
established local laws and customs.
    5. Housing for the elderly means retirement communities or similar 
types of housing specifically designed for households composed of one 
or more persons 62 years of age or more at the time of initial 
occupancy.
    In response to public comments, EPA and HUD have added a definition 
for this term to the regulatory text. This definition is consistent 
with the definition used by HUD's Supportive Housing for the Elderly 
Program (See 24 CFR 277.1(f)). While some commenters recommended the 
use of a ``55 years or older'' standard (as used to define ``older 
person'' in the Fair Housing Act), HUD believes that the current 
definition is more consistent with HUD's other programs for the 
elderly.
    6. Lead-based paint means paint or other surface coatings that 
contain lead equal to or in excess of 1.0 milligram per square 
centimeter or 0.5 percent by weight.
    This term has been modified slightly from the language provided in 
Title X and TSCA to retain consistency with the many HUD programs 
already using the levels defined under section 302(c) of the Lead-Based 
Paint Poisoning Prevention Act.
    7. Lead-based paint free housing means target housing that has been 
found to be free of paint or other surface coatings that contain lead 
equal to or in excess of 1.0 milligram per square centimeter or 0.5 
percent by weight.
    EPA and HUD have added this definition in support of the provision 
of the rule that allows rental transactions in ``lead-based paint 
free'' rental housing to be excluded from the section 1018 
requirements. EPA and HUD provide further discussion of this provision 
in unit IV.A.2. of this preamble.
    8. Lead-based paint hazard means any condition that causes exposure 
to lead from lead-contaminated dust, lead-contaminated soil, or lead-
contaminated paint that is deteriorated or present in accessible 
surfaces, friction surfaces, or impact surfaces that would result in 
adverse human health effects as established by the appropriate Federal 
agency.
    This term, defined in section 1004 of Title X, is unchanged from 
the proposed rule. EPA has released guidance on identifying lead 
hazards in paint, dust, and soil (60 FR 47248) and is currently 
developing Federal standards. In addition, HUD has released 
comprehensive guidelines for evaluation and control of lead-based paint 
hazards in housing (Ref. 7).
    9. Lessee means any entity that enters into an agreement to lease, 
rent, or sublease target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    EPA and HUD received limited comments on this definition and have 
made minor revisions to the language of the definition to clarify its 
applicability to trusts and subleases.
    10. Lessor means any entity that offers target housing for lease, 
rent, or sublease, including but not limited to individuals, 
partnerships, corporations, trusts, government agencies, housing 
agencies, Indian tribes, and nonprofit organizations.
    EPA and HUD received limited comments on this definition and have 
made minor revisions to the language of the definition to clarify its 
applicability to trusts and subleases.
    11. Owner means any entity that has legal title to target housing, 
including but not limited to individuals, partnerships, corporations, 
trusts, government agencies, housing agencies, Indian tribes, and 
nonprofit organizations, except where a mortgagee holds legal title to 
property serving as collateral for a mortgage loan, in which case the 
owner is considered the mortgagor.
    EPA and HUD have revised the definition provided in the proposed 
rule to clarify its applicability to trusts and to clarify one 
situation in which mortgage lenders (mortgagees), rather than borrowers 
(mortgagors), hold title and are therefore owners.
    12. Purchaser means an entity that enters into an agreement to 
purchase an interest in target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    EPA and HUD received limited comments on this definition and have 
made minor revisions to the language of the definition to clarify its 
applicability to trusts.
    13. Risk assessment means an on-site investigation to determine and 
report the existence, nature, severity, and location of lead-based 
paint hazards in residential dwellings, including: (1) Information 
gathering regarding the age and history of the housing and occupancy by 
children under age 6; (2) visual inspection; (3) limited wipe sampling 
or other environmental sampling techniques; (4) other activity as may 
be appropriate; and (5) provision of a report explaining the results of 
the investigation.
    This definition, provided in section 1004 of Title X, is unchanged 
from the proposed rule. Under section 402 of TSCA, EPA will promulgate 
separate regulations regarding the conduct of such activities, as well 
as a program for training and certifying workers engaged in these 
activities. Under section 404 of TSCA, these regulations will also 
include a process for authorizing States to implement their own 
training and certification programs.
    14. Seller means any entity that transfers legal title to target 
housing, in whole or in part, in return for consideration, including 
but not limited to individuals, partnerships, corporations, trusts, 
government agencies, housing agencies, Indian tribes, and nonprofit 
organizations. The term ``seller'' also includes: (1) An entity that 
transfers shares in a cooperatively owned project, in return for 
consideration and (2) an entity that transfers its interest in a 
leasehold in jurisdictions or circumstances where it is legally 
permissible to separate the fee title from the title to the 
improvement, in return for consideration.
    EPA and HUD received limited comments on this definition and have 
made minor revisions to the language of the definition to clarify its 
applicability to trusts.
    15. Target housing means any housing constructed prior to 1978, 
except housing for the elderly or persons with disabilities (unless any 
child who is less than 6 years of age resides or is expected to reside 
in such housing) or any 0-bedroom dwelling.
    This definition was provided by section 1004 of Title X and is 
unchanged. Where commenters provided recommendations for revising or 
clarifying the definition, EPA and HUD have addressed those comments 
within the scope and applicability section of the final rule. 
Commenters also noted that the proposed rule 

[[Page 9071]]
misstated the statutory definition by limiting the 0-bedroom dwelling 
exception to housing where no children under 6 reside or are expected 
to reside. EPA and HUD have modified the definition to reflect the 
statutory language.
    16. 0-bedroom dwelling means any residential dwelling in which the 
living area is not separated from the sleeping area. Such term includes 
efficiencies, studio apartments, dormitory housing, military barracks, 
and rentals of individual rooms in residential dwellings.
    In the preamble of the proposed rule, EPA and HUD clarified their 
interpretation of this term by identifying efficiencies, studio 
apartments, dormitory housing, military barracks, and other such 
housing in which the living area is unseparated from the sleeping area 
as types of dwellings that are not covered under the rule. EPA and HUD 
have added rentals of individual rooms in a residential dwelling to the 
types of transactions that would involve a 0-bedroom dwelling. All of 
these clarifications are included in the regulatory definition in the 
final rule's regulatory text.

D. Changes to the Disclosure Requirements

    Section 1018(a)(1)(B) requires that ``before the purchaser or 
lessee is obligated under any contract to purchase or lease the 
housing, . . .the seller or lessor shall. . .disclose to the purchaser 
or lessee the presence of any known lead-based paint or any lead-based 
paint hazards, in such housing, and provide any lead hazard evaluation 
report available to the seller or lessor.''
    EPA and HUD received more than 150 comments on their proposed 
requirements for such information disclosure, addressing both the 
proposed disclosure process and the issue of what information should be 
covered. In particular, recurring themes among the comments included: 
(1) The need for greater specificity regarding the necessary timing for 
disclosure activities; (2) concerns over which activities should 
constitute disclosure; and (3) what kinds of information should be 
disclosed under this rule. The following is a brief discussion of these 
key points and a summary of the regulatory requirements.
    1. Timing of disclosure events. In addressing the need for greater 
clarity regarding the timing of disclosure activities, EPA and HUD have 
attempted to maximize the parties' flexibility in incorporating these 
requirements during negotiations. EPA and HUD believe that this 
flexibility is important given the many types of transactions covered 
by these provisions and the existence of distinct local requirements 
and customs. Therefore, the final rule identifies only the latest point 
at which full disclosure must occur. Using the statute as a guide, EPA 
and HUD have identified this point as before the purchaser or lessee 
becomes obligated under any contract to purchase or lease the housing.
    Some commenters raised the concern, however, that without 
additional clarification regarding how and when information must be 
disclosed, the final rule could cause unnecessary confusion regarding 
how the requirements will work in actual practice. After reviewing the 
framework set out in the proposed rule, EPA and HUD have revised and 
clarified the requirements in a number of ways. First, the final rule 
contains numerous minor changes to the wording of definitions and 
requirements to clarify that the rule does not require mass disclosure 
to all prospective purchasers, regardless of their degree of interest. 
Second, the rule requires that certain disclosure and acknowledgment 
language become part of the final sale or lease contract. In making 
these changes, EPA and HUD have considered the typical negotiation 
process involved in leasing and sales transactions.
    During sales transactions, for example, purchasers often take the 
first step toward formalizing a sales agreement by providing a written 
offer to purchase the housing. If accepted and signed by the seller, 
this offer typically becomes the sales contract. The statute's mandate 
that disclosure and notification take place before the purchaser is 
obligated imposes a requirement on the seller to disclose information 
before accepting the purchaser's offer, thereby allowing the purchaser 
an opportunity to review the information and to possibly amend the 
offer. If a seller were to accept a purchaser's offer and obligate the 
purchaser before disclosing known information, such a seller would be 
in violation of Title X and this rule. Of course, the parties can 
always agree to conduct the disclosure activities in advance of 
contract discussions, provided that the final contract includes the 
signed and dated disclosure elements mandated by this rule.
    In leasing transactions, the disclosure process is even simpler. 
While the parties are free to negotiate when the disclosure process 
occurs, lessors must provide the information and complete the 
disclosure portions of the lease (or attachment) before the lessee 
becomes obligated under a contract to lease the housing. By requiring 
that the disclosure information be included in or as an attachment to 
the lease, EPA and HUD seek to ensure that the disclosure process 
automatically occurs during lease negotiations.
    The requirement that the contract or an attachment include 
disclosure language fulfills two additional functions. First, the 
process of completing and signing these sections ensures that all 
parties are aware of their rights and obligations and are able to 
confirm that the appropriate actions have already occurred. Second, 
this disclosure language provides a clear record of compliance.
    While sections 1018(a)(2) and (3) mandate lead warning language for 
all sales transactions, the inclusion of such language as an attachment 
to leases is not specifically mandated by Title X. EPA and HUD, 
however, believe that it is necessary to include the warning language 
in leases as well. Further, the completion and retention of disclosure 
and acknowledgment language is a necessary component of any effective, 
enforceable disclosure requirement for leasing transactions.
    2. Components of full disclosure. EPA and HUD consider full 
disclosure to have occurred when the seller or lessor has provided the 
following items to the purchaser or lessee.
    a. A lead hazard information pamphlet approved by EPA. As required 
by TSCA section 406, EPA has developed a lead hazard information 
pamphlet, entitled Protect Your Family from Lead in Your Home, and has 
made it available through government channels and private sources. EPA 
issued the final notice of the pamphlet's availability in the Federal 
Register of August 1, 1995 (60 FR 39167). In addition to providing 
detailed information on how to obtain copies (individually, in bulk, 
and as camera-ready reprints), the notice describes the process of 
developing the pamphlet, including considerable public review and 
comment.
    The statute also allows States to develop their own lead hazard 
information pamphlets under section 406, provided that they obtain 
authorization and approval from EPA. Several States that already have 
disclosure provisions have expressed their desire to seek approval to 
use their own pamphlets in lieu of the Federal pamphlet. EPA and HUD 
encourage States interested in developing their own materials to seek 
approval of their pamphlets for distribution under the section 1018 
regulations.
    b. Notice of the presence of known lead-based paint and/or lead-
based paint hazards. Sellers and lessors must disclose, based on their 
actual knowledge, whether the target housing 

[[Page 9072]]
is known to contain lead-based paint and/or lead-based paint hazards. 
EPA and HUD received many comments on the types of information under 
consideration for disclosure under these requirements. Many of the 
commenters expressed concern that the proposed rule was too vague about 
what constituted ``known information.'' For example, did EPA and HUD 
intend for the disclosure requirements to distinguish between 
information already in the possession of the seller or lessor and 
information that could be obtained only by some further investigation 
or inference? Several commenters described this distinction in terms of 
actual knowledge (knowledge stemming from existing facts and 
information) versus constructive knowledge (knowledge that could be 
inferred or obtained by further inquiry). An expectation that the 
property owners meet a constructive standard for knowledge could create 
an implied testing requirement.
    While the Agencies hope to encourage lead hazard evaluation and 
reduction efforts through all of their regulatory and non-regulatory 
programs, neither Agency believes that Congress intended to mandate 
additional lead hazard evaluation activities in private housing. EPA 
and HUD believe that Congress intended to limit the disclosure 
obligation to actual knowledge. The final rule, therefore, embraces an 
actual knowledge standard as well. With this clear standard, property 
owners and their agents will be able to take affirmative steps to 
comply fully with the rule and be confident that they have met the 
requirements of the law and its implementing regulations. EPA and HUD 
believe that such finality is a necessary part of this regulation, 
given the diverse makeup of the regulated community.
    c. Provision of records and reports on lead-based paint and/or 
lead-based paint hazards available to the seller or lessor. As mandated 
by section 1018(a)(1)(B), sellers and lessors must ``provide to the 
purchaser or lessee any lead hazard evaluation report available to the 
seller or lessor.'' EPA and HUD have interpreted ``available evaluation 
reports'' to mean records and reports that pertain to lead-based paint 
and/or lead-based paint hazards in the target housing and that are in 
the possession of the seller or lessor or that are reasonably 
obtainable by the seller or lessor at the time of the disclosure.
    During the proposed rule phase, EPA and HUD requested comment 
regarding the disclosure of known lead-based paint and/or lead-based 
paint hazards in other units within target housing. EPA and HUD 
received both supporting and opposing comments on this requirement. 
Opponents argued that distinct dwelling units can have very different 
painting histories, making information on one unit an unreliable 
indicator of other units. Proponents argued that regardless of 
differences that may exist, the painting histories of different units 
in a building are usually similar enough to provide valuable 
information for individuals considering whether lead hazard exposure 
precautions are prudent.
    EPA and HUD believe that information and reports on other units in 
the target housing are directly relevant to prospective purchasers and 
lessees if the information stems from evaluation or reduction efforts 
in the target housing as a whole. In large multifamily properties, 
evaluations do not necessarily examine every dwelling unit in the 
housing. Rather, inspectors or risk assessors examine a representative 
sample of the dwelling units and apply the findings to the housing as a 
whole. While such evaluations might not include data on a specific 
unit, the fact that the evaluation was designed to provide information 
on the housing as a whole makes the report's findings relevant.
    The proposed rule also requested comment on whether sellers and 
lessors should have to disclose information on past elevated blood-lead 
levels in other occupants of target housing. Based on the comments and 
further deliberation, EPA and HUD decided against requiring disclosure 
of medical information for several reasons. As commenters pointed out, 
lead exposure, elevated blood-lead levels, or lead poisoning may come 
from sources other than lead-based paint hazards in the housing. Where 
elevated blood-lead levels were determined to stem from lead-based 
paint hazards in the housing, the follow-up environmental assessment 
activities in the affected person's housing will likely generate more 
germane records regarding lead-based paint exposure hazards in the 
housing.
    Commenters also questioned whether disclosure requires the actual 
transfer of all documentation from the seller or lessor, or whether 
simply making the information accessible for the purchaser's or 
lessee's evaluation is adequate. Based on the mandate in section 
1018(a)(1)(B), EPA and HUD believe that Congress clearly intended for 
purchasers and lessees to receive their own copies of the records and 
reports available to the seller or lessor. Therefore, the seller or 
lessor remains obligated to provide copies of all relevant materials to 
the purchaser or lessee.
    d. Completed Lead Warning Statement and acknowledgment language, 
attached to the sales or lease contract. This information, set out in 
24 CFR 35.92 and 40 CFR 745.113, documents the disclosure and 
acknowledgment process, and serves as the primary confirmation tool for 
all parties in ensuring full compliance with the regulatory 
requirements. This information is especially important in cases where 
purchasers or lessees conduct contract negotiations through their own 
representatives (requiring sellers, lessors, or their agents to provide 
documents to the representative instead of the purchaser or lessee). In 
such cases, the attachment provides a record that sellers, lessors, and 
agents can use to confirm that purchasers and lessees have received the 
necessary disclosure materials.
    The proposed rule required the use of disclosure forms as 
attachments to each contract to purchase or lease target housing. These 
forms would have served as the key mechanisms for documenting 
compliance with the requirements. EPA and HUD carefully considered the 
merits of each element, limiting the rule to information necessary for 
demonstrating full compliance.
    The final rule includes some changes to the information that must 
be included in the contract. Where the proposed rule required that 
sellers and lessors use federally developed disclosure forms, the final 
rule provides greater flexibility for negotiating parties to develop 
their own language, provided that it contains the mandated elements. 
EPA and HUD eliminated the requirement that parties use a single form. 
Instead, the final rule mandates only the information elements that 
must be included without mandating specific formats or forms.
    This flexibility is especially important to States that have 
developed, or are considering developing, their own disclosure 
requirements. During the comment period, several States requested that 
the final rule provide flexibility for States to merge their forms with 
the Federal form, eliminating unnecessary duplication. Under the final 
rule, States and jurisdictions will be able to make changes to the 
format as necessary to retain consistency with State and local laws and 
customs.
    The following is a discussion of the required elements.
    (i) Seller, agent, and purchaser requirements. The final rule 
requires that each contract to sell target housing include an 
attachment containing specific disclosure and acknowledgment 

[[Page 9073]]
elements, in the language of the contract (e.g., English, Spanish). The 
elements required are described below:
    (A) The first required element is the Lead Warning Statement, 
consisting of the following language:

    Every purchaser of any interest in residential real property on 
which a residential dwelling was built prior to 1978 is notified 
that such property may present exposure to lead from lead-based 
paint that may place young children at risk of developing lead 
poisoning. Lead poisoning in young children may produce permanent 
neurological damage, including learning disabilities, reduced 
intelligence quotient, behavioral problems, and impaired memory. 
Lead poisoning also poses a particular risk to pregnant women. The 
seller of any interest in residential real property is required to 
provide the buyer with any information on lead-based paint hazards 
from risk assessments or inspections in the seller's possession and 
notify the buyer of any known lead-based paint hazards. A risk 
assessment or inspection for possible lead-based paint hazards is 
recommended prior to purchase.

    Congress mandated this language in section 1018(a)(3) of Title X. 
While several commenters recommended providing simpler language, EPA 
and HUD are constrained by the mandate and have retained the statement 
as proposed.
    (B) The second required element is a statement disclosing the 
presence of any known lead-based paint and/or lead-based paint hazards 
in the target housing or indicating no knowledge of the presence of 
lead-based paint and/or lead-based paint hazards. The seller must also 
provide any additional information available concerning the known lead-
based paint and/or lead-based paint hazards, such as the basis for the 
determination that lead-based paint and/or lead-based paint hazards 
exist in the housing, the location of the lead-based paint and/or lead-
based paint hazards, and the condition of the painted surfaces. The 
statement must also list all records and reports pertaining to lead-
based paint and/or lead-based paint hazards that are available to the 
seller and that have been provided to the purchaser. If no such records 
or reports are available to the seller, the statement must so indicate.
    (C) The third element is a statement affirming that the purchaser 
has received the information noted in paragraph (B) above and the lead 
hazard information pamphlet required under section 406 of TSCA (15 
U.S.C. 2696). The pamphlet described above may be the Federal pamphlet 
entitled Protect Your Family from Lead in Your Home or a State-
developed pamphlet that has been approved by EPA.
    (D) The fourth required element is a statement that the purchaser 
has received a 10-day opportunity to conduct a risk assessment or 
inspection for the presence of lead-based paint and/or lead-based paint 
hazards (unless the parties have mutually agreed to a different period 
of time), before becoming obligated under the contract to purchase the 
housing. Alternatively, a purchaser who chooses to waive the risk 
assessment or inspection opportunity must so indicate in writing.
    (E) The fifth required element is a statement by any agent involved 
in the transaction that the agent has informed the seller of the 
seller's obligations under 42 U.S.C. 4852d and that the agent is aware 
of his/her duty to ensure compliance with the requirements of this 
rule.
    (F) The sixth required element is the signatures of the seller(s), 
agent(s), and purchaser(s), certifying the accuracy of their statements 
on the attachment, along with their dates of signature. These 
signatures document the acceptance by the parties of the information 
they have provided on the attachment as a whole and alert the various 
parties to their respective roles and responsibilities.
    (ii) Lessor, agent, and lessee requirements. Each contract to lease 
target housing must include the following elements, as an attachment or 
within the contract, in the language of the contract (e.g., English, 
Spanish).
    (A) The first required element is a Lead Warning Statement with the 
following language:

    Housing built before 1978 may contain lead-based paint. Lead 
from paint, paint chips, and dust can pose health hazards if not 
managed properly. Lead exposure is especially harmful to young 
children and pregnant women. Before renting pre-1978 housing, 
lessors must disclose the presence of known lead-based paint and/or 
lead-based paint hazards in the dwelling. Lessees must also receive 
a federally approved pamphlet on lead poisoning prevention.

    EPA and HUD received a considerable amount of comment regarding the 
language of the Lead Warning Statement used in the leasing disclosure 
attachment. EPA and HUD have developed a modified Lead Warning 
Statement for leasing transactions that uses simpler words and syntax 
than the purchase warning statement required by Title X.
    (B) The second required element is a statement disclosing the 
presence of any known lead-based paint and/or lead-based paint hazards 
in the target housing or indicating no knowledge of the presence of 
lead-based paint and/or lead-based paint hazards. The lessor shall also 
provide any additional information available concerning the known lead-
based paint and/or lead-based paint hazards, such as the basis for the 
determination that lead-based paint and/or lead-based paint hazards 
exist; the location of the lead-based paint and/or lead-based paint 
hazards; and the condition of the painted surfaces. The statement must 
also list any records or reports pertaining to lead-based paint and/or 
lead-based paint hazards that are available to the lessor and that have 
been provided to the lessee. If no such records or reports are 
available to the lessor, the statement must so indicate.
    (C) The third required element is a statement affirming that the 
lessee received the information noted in paragraph (B) above and the 
lead hazard information pamphlet required under section 406 of TSCA (15 
U.S.C. 2686).
    (D) The fourth required element is a statement by any agent 
involved in the transaction that the agent has informed the lessor of 
the lessor's obligations under the law and that the agent is aware of 
his/her duty to ensure compliance with the requirements of this rule.
    (E) The fifth required element is the signatures of the lessor(s), 
agent(s), and lessee(s), certifying the accuracy of their statements, 
along with their dates of signature. These signatures document the 
acceptance by the parties of the information they have provided as a 
whole and alert the various parties to the roles and responsibilities 
of each party.
    3. Sample disclosure attachments. Recognizing that many parties may 
prefer having access to a sample format, EPA and HUD have developed 
sample disclosure formats for sales and leasing contracts for public 
reference. These samples are not included in the regulatory text 
itself. Nothing in the rule requires the use of these specific formats 
if a seller or lessor wishes to develop a separate format that includes 
all of the required elements.

[[Page 9074]]


           (Sample Disclosure Format for Target Housing Sales)          
------------------------------------------------------------------------
                                                                        
            Disclosure of Information on Lead-Based Paint               
   and/or Lead-Based Paint Hazards                                      
                                                                        
  Lead Warning Statement                                                
    Every purchaser of any interest in residential real                 
   property on which a residential dwelling was built prior             
   to 1978 is notified that such property may present                   
   exposure to lead from lead-based paint that may place                
   young children at risk of developing lead poisoning.                 
   Lead poisoning in young children may produce permanent               
   neurological damage, including learning disabilities,                
   reduced intelligence quotient, behavioral problems, and              
   impaired memory. Lead poisoning also poses a particular              
   risk to pregnant women. The seller of any interest in                
   residential real property is required to provide the                 
   buyer with any information on lead-based paint hazards               
   from risk assessments or inspections in the seller's                 
   possession and notify the buyer of any known lead-based              
   paint hazards. A risk assessment or inspection for                   
   possible lead-based paint hazards is recommended prior               
   to purchase.                                                         
                                                                        
  Seller's Disclosure                                                   
                                                                        
  (a) Presence of lead-based paint and/or lead-based paint              
    (i)---- Known lead-based paint and/or lead-based paint              
   hazards are present in the housing (explain).                        
                                                                        
    -------------------------------------------------------             
   -----------------------------------                                  
                                                                        
    (ii)----Seller has no knowledge of lead-based paint and/            
                                                                        
  (b) Records and reports available to the seller (check                
   (i) or (ii) below):                                                  
                                                                        
    (i)----Seller has provided the purchaser with all                   
   available records and reports pertaining to lead-based               
   paint and/or lead-based paint hazards in the housing                 
   (list documents below).                                              
                                                                        
    -------------------------------------------------------             
   -----------------------------------                                  
                                                                        
    (ii)---- Seller has no reports or records pertaining to             
   lead-based paint and/or lead-based paint hazards in the              
   housing.                                                             
                                                                        
  Purchaser's Acknowledgment (initial)                                  
                                                                        
  (c)----Purchaser has received copies of all information               
   listed above.                                                        
                                                                        
  (d)----Purchaser has received the pamphlet Protect Your               
   Family from Lead in Your Home.                                       
                                                                        
  (e)----Purchaser has (check (i) or (ii) below):                       
                                                                        
    (i)---- received a 10-day opportunity (or mutually                  
   agreed upon period) to conduct a risk assessment or                  
   inspection for the presence of lead-based paint and/or               
   lead-based paint hazards; or                                         
                                                                        
    (ii)---- waived the opportunity to conduct a risk                   
   assessment or inspection for the presence of lead-based              
   paint and/or lead-based paint hazards.                               
                                                                        
  Agent's Acknowledgment (initial)                                      
                                                                        
  (f)----Agent has informed the seller of the seller's                  
   obligations under 42 U.S.C. 4852d and is aware of his/               
   her responsibility to ensure compliance.                             
                                                                        
  Certification of Accuracy                                             
                                                                        
    The following parties have reviewed the information                 
   above and certify, to the best of their knowledge, that              
   the information they have provided is true and accurate.             
                                                                        
  --------------------      --------------------      -----             
   -------------      ------------------                                
  Seller                      Date                      Sel             
   ler                  Date                                            
                                                                        
  --------------------      --------------------      -----             
   -------------      ------------------                                
  Purchaser                  Date                      Purc             
   haser              Date                                              
                                                                        
  --------------------      --------------------      -----             
   -------------      ------------------                                
  Agent                      Date                      Agen             
   t                  Date                                              
                                                                        
------------------------------------------------------------------------


[[Page 9075]]


    (Sample Disclosure Format for Target Housing Rentals and Leases)    
------------------------------------------------------------------------
                                                                        
            Disclosure of Information on Lead-Based Paint               
   and/or Lead-Based Paint Hazards                                      
                                                                        
  Lead Warning Statement                                                
  Housing built before 1978 may contain lead-based paint.               
   Lead from paint, paint chips, and dust can pose health               
   hazards if not managed properly. Lead exposure is                    
   especially harmful to young children and pregnant women.             
   Before renting pre-1978 housing, lessors must disclose               
   the presence of known lead-based paint and/or lead-based             
   paint hazards in the dwelling. Lessees must also receive             
   a federally approved pamphlet on lead poisoning                      
   prevention.                                                          
                                                                        
  Lessor's Disclosure                                                   
  (a) Presence of lead-based paint and/or lead-based paint              
   hazards (Check (i) or (ii) below):                                   
    (i)---- Known lead-based paint and/or lead-based paint              
   hazards are present in the housing (explain).                        
                                                                        
                                                                        
   --------------------------------------------------------             
   ---------------                                                      
    (ii)----Lessor has no knowledge of lead-based paint and/            
   or lead-based paint hazards in the housing.                          
  (b) Records and reports available to the lessor (Check                
   (i) or (ii) below):                                                  
    (i)---- Lessor has provided the lessee with all                     
   available records and reports pertaining to lead-based               
   paint and/or lead-based paint hazards in the housing                 
   (list documents below).                                              
                                                                        
    -------------------------------------------------------             
   -------------------                                                  
    (ii)----Lessor has no reports or records pertaining to              
   lead-based paint and/or lead-based paint hazards in the              
   housing.                                                             
                                                                        
  Lessee's Acknowledgment (initial)                                     
  (c)----Lessee has received copies of all information                  
   listed above.                                                        
  (d)----Lessee has received the pamphlet Protect Your                  
   Family from Lead in Your Home.                                       
                                                                        
  Agent's Acknowledgment (initial)                                      
  (e)------ Agent has informed the lessor of the lessor's               
   obligations under 42 U.S.C. 4852d and is aware of his/               
   her responsibility to ensure compliance.                             
                                                                        
  Certification of Accuracy                                             
  The following parties have reviewed the information above             
   and certify, to the best of their knowledge, that the                
   information they have provided is true and accurate.                 
                                                                        
  --------------------      --------------------      -----             
   ---------------      ------------------                              
  Lessor                    Date                      Lesso             
   r                      Date                                          
                                                                        
  --------------------      --------------------      -----             
   ---------------      ----------------                                
  Lessee                    Date                      Lesse             
   e                      Date                                          
                                                                        
  --------------------      --------------------      -----             
   ---------------      ------------------                              
  Agent                      Date                      Agen             
   t                      Date                                          
                                                                        
------------------------------------------------------------------------


[[Page 9076]]


    4. Recordkeeping requirements. EPA and HUD have retained the 
recordkeeping requirements under this rule largely as proposed. The 
seller and any agent are required to retain a copy of the completed 
disclosure and acknowledgment contract attachment (discussed below), 
required under Secs. 35.92(a) and 745.113(a), for 3 years from the 
completion date of the sale. Similarly, the lessor and any agent are 
required to retain a copy of the completed lease or attachment, 
required under Sec. 35.92(b) and Sec. 745.113(b) of this rule for 3 
years from the commencement of the leasing period. EPA and HUD have 
determined that a 3-year period is an appropriate amount of time to 
ensure compliance with the requirements of Title X and to support 
Federal compliance monitoring efforts. This recordkeeping requirement 
is not intended to place any limitations on civil suits under Title X 
or to otherwise affect a lessee's or purchaser's rights under the civil 
penalty provisions of section 1018(b)(3) of Title X.
    EPA and HUD requested comment on whether the rule should include an 
additional recordkeeping provision requiring that property owners 
retain all records and reports of lead-based paint and/or lead-based 
paint hazards in the housing for the length of their ownership. Based 
on the statute's use of the term ``available'' lead hazard evaluation 
reports, EPA and HUD have determined that a specific recordkeeping 
requirement for such reports is beyond the scope of this regulation. 
EPA and HUD have, however, clarified ``available'' lead hazard 
evaluation reports to encompass records and reports in the possession 
of the seller or lessor or reasonably obtainable by the seller or 
lessor at the time of the disclosure. This approach recognizes that 
third parties may in some cases play an independent recordkeeping role 
for the seller or lessor.
    While the Agencies do not mandate the retention of these records, 
EPA and HUD encourage sellers and lessors to retain relevant records in 
anticipation of future sale or lease. The information provided can help 
purchasers and occupants take exposure prevention precautions during 
later ownership or occupancy. The requirement to disclose the presence 
of known lead-based paint and/or lead-based paint hazards remains even 
if the seller or lessor is unable to locate the original reports 
quantifying the data. Section 1018 requires sellers and lessors to both 
(1) disclose the presence of known lead-based paint and/or lead-based 
paint hazards in the housing and (2) provide available written records 
and reports to the purchaser or lessee. By mandating that both actions 
occur, Congress recognized the distinction between the two actions, and 
the fact that the seller or lessor might have actual knowledge of lead-
based paint and/or lead-based paint hazards above and beyond that 
present in available reports.
    5. Failure to fully disclose before ratification of contracts. As 
mandated by Title X, the disclosure of information, the provision of 
the lead hazard information pamphlet, and the purchaser's opportunity 
to conduct a risk assessment or inspection must occur before the 
purchaser or lessee becomes obligated under any contract to purchase or 
lease the dwelling. Section 1018(c) prohibits regulatory provisions 
that would ``affect the validity or enforceability of any sale or 
contract for the purchase and sale or lease of any interest in 
residential real property or any loan, loan agreement, mortgage, or 
lien made or arising in connection with a mortgage loan'' and states 
that nothing in the rule ``shall create a defect in title.'' The 
disclosure requirements contained in this rule must occur prior to 
contract ratification and, as such, do not affect the validity of the 
subsequent contract. Nor does failure to conduct full disclosure before 
sale or lease affect the validity of the sales or leasing contract 
itself. Rather, purchasers seeking remedy for the non-disclosure may 
avail themselves of the civil remedies afforded by section 1018 of 
Title X.
    6. Opportunity to conduct a risk assessment or inspection. Section 
1018(a) requires that sellers provide purchasers with a 10-day 
opportunity to conduct a risk assessment or inspection for the presence 
of lead-based paint and/or lead-based paint hazards before becoming 
obligated under a purchase contract. The length of time may be 
shortened or lengthened by mutual agreement. In the proposed rule, EPA 
and HUD offered several approaches for implementing this provision of 
section 1018: (1) Establishing Federal standards for the implementation 
of the evaluation period, providing flexibility for adjustment by 
mutual consent; (2) limiting the regulatory text to the statutory 
language, thereby maximizing the discretion of the two parties in 
negotiating the terms; (3) codifying contract contingency language for 
use in complying with the final rule; and (4) establishing requirements 
for providing evaluation opportunities before the preparation of 
contracts.
    Recognizing that home inspections for various hazards and housing 
defects are common occurrences during housing transactions around the 
country, EPA and HUD believe that the market can incorporate this 
requirement into future transactions without detailed regulatory 
language. The final rule, therefore, steers away from the proposed 
rule's preferred approach of codifying Federal standards for the 
performance of the 10-day evaluation period provision.
    However, EPA and HUD also recognize that some private sellers may 
choose to conduct their housing sales without the aid of a trained 
agent and may lack familiarity with the standard processes for 
conducting such evaluations in the sales transaction. For such persons, 
EPA and HUD are providing the following discussion of several likely 
approaches for implementing this provision.
    First, some purchasers may choose to waive the opportunity for a 
risk assessment or inspection. Purchasers may be especially inclined to 
waive the opportunity in cases where the seller provides significant 
amounts of relevant information on the property during the disclosure 
process, or in cases where no children are expected to reside in the 
housing. If the purchaser chooses to waive the evaluation opportunity, 
the purchaser is still obligated to acknowledge receipt of the 
evaluation opportunity on the attachment, documenting this voluntary 
decision to waive the opportunity.
    EPA and HUD expect that in most cases where the purchaser chooses 
to exercise his or her evaluation opportunity, the parties will develop 
and incorporate into the contract mutually agreeable terms for the 
conduct and completion of the evaluation opportunity. The final rule 
provides sellers and purchasers with broad flexibility to develop terms 
for performing the risk assessment or inspection.
    As many commenters noted, home inspections are already common 
aspects of housing transactions. Frequently, these inspections are 
incorporated into the sales contracts as contingency clauses, providing 
mutual agreement on the timing, terms, and conduct of the inspection. 
Common terms addressed in these clauses include: (i) The starting and 
ending day of the inspection period; (ii) any contingencies and 
conditions tied to the contract regarding the inspection period; (iii) 
the process for removing any contingency or condition following the 
completion of the inspection; and (iv) the disposition of any earnest 
money provided by the purchaser before the opportunity to inspect. This 
general framework is one possible approach that parties can consider 
when developing mutually 

[[Page 9077]]
agreeable terms for the evaluation period required by section 1018(a) 
of Title X.
    While most commenters stressed the importance of providing 
flexibility for the parties to develop mutually agreeable evaluation 
terms, many also recommended the inclusion of sample language as a 
reference. For the purpose of providing guidance on creating contract 
language, EPA and HUD have included the following sample contract 
contingency clause for optional use. This language is offered as a 
sample only, and nothing in this rule imposes a requirement on either 
party to accept or reject this language in the current or modified 
form.

                                                                        
------------------------------------------------------------------------
                                                                        
                                Sample Contract Contingency             
   Language                                                             
                                                                        
    This contract is contingent upon a risk assessment or               
   inspection of the property for the presence of lead-                 
   based paint and/or lead-based paint hazards at the                   
   Purchaser's expense until 9 p.m. on the tenth calendar-              
   day after ratification [Insert date 10 days after                    
   contract ratification or a date mutually agreed upon].               
   (Intact lead-based paint that is in good condition is                
   not necessarily a hazard. See the EPA pamphlet Protect               
   Your Family From Lead in Your Home for more                          
   information.) This contingency will terminate at the                 
   above predetermined deadline unless the Purchaser (or                
   Purchaser's agent) delivers to the Seller (or Seller's               
   agent) a written contract addendum listing the specific              
   existing deficiencies and corrections needed, together               
   with a copy of the inspection and/or risk assessment                 
   report. The Seller may, at the Seller's option, within --            
   ---- days after Delivery of the addendum, elect in                   
   writing whether to correct the condition(s) prior to                 
   settlement. If the Seller will correct the condition,                
   the Seller shall furnish the Purchaser with                          
   certification from a risk assessor or inspector                      
   demonstrating that the condition has been remedied                   
   before the date of the settlement. If the Seller does                
   not elect to make the repairs, or if the Seller makes a              
   counter-offer, the Purchaser shall have ------ days to               
   respond to the counter-offer or remove this contingency              
   and take the property in ``as is'' condition or this                 
   contract shall become void. The Purchaser may remove                 
   this contingency at any time without cause.                          
                                                                        
------------------------------------------------------------------------

E. Agent Responsibilities

    Title X specifically addresses the responsibilities of agents, 
requiring them to ensure compliance with the provisions of the law. 
Agents fulfill this requirement by informing sellers or lessors of 
their obligations and by making sure that these activities are 
completed either by the seller or lessor or by the agent personally. 
Accordingly, 24 CFR 35.94(b) and 40 CFR 745.107(c) identify the 
seller's affirmative duty to disclose to the agent any known lead-based 
paint and/or lead-based paint hazards on the property. Provided that 
the agent has actually informed the seller or lessor of his/her 
obligation, the final rule notes that the agent will not be responsible 
for information withheld from the agent by the seller or lessor.

V. Non-Compliance and Enforcement

    EPA and HUD received considerable comment on the enforcement 
provisions discussed in the statute and the proposed rule. Many 
commenters requested more guidance regarding the Agencies' plans for 
enforcement of the provisions, as well as assurances that the Agencies 
recognize the importance of active education and outreach to the 
regulated community. As all enforcement authority for EPA and HUD 
derives directly from the authorizing statutory language, both the 
proposed rule and the final rule contain enforcement language that is 
essentially the same as language provided in Title X and TSCA. The 
following is a discussion of the general enforcement authority provided 
by Congress, along with some discussion of the process that EPA and HUD 
will use in developing a sensible, effective enforcement approach.

A. HUD Authority

    Section 1018(b)(1) of Title X authorizes HUD to impose civil 
monetary penalties on any person who knowingly violates section 1018. 
This authority applies to violations of this final rule as well. HUD 
can impose penalties under section 102 of the Department of Housing and 
Urban Development Reform Act of 1989 (42 U.S.C. 3545). These penalties 
may be up to $10,000 for each violation. In addition, section 
1018(b)(2) of Title X authorizes the Secretary to ``take such lawful 
action as may be necessary to enjoin any violation'' of the law's 
provisions.

B. EPA Authority

    1. Civil. Section 1018(b)(5) of Title X provides that failure or 
refusal to comply with section 1018 or its implementing regulations is 
a violation of TSCA section 409. Violations of TSCA section 409 are 
subject to TSCA section 16 penalties. Thus, a violator of section 1018 
can be subject to the penalty provisions under TSCA section 16 of up to 
$10,000 for each violation.
    2. Criminal. TSCA section 16(b) provides that any person who 
knowingly or willfully violates section 409 (and thus section 1018) 
could, in addition to or instead of any civil penalty, be subject, upon 
conviction, to a fine of not more than $25,000 for each day of 
violation or to imprisonment for not more than 1 year, or both. For the 
purposes of enforcement under section 1018, Congress has modified the 
application of TSCA section 16, limiting the fine to $10,000 ``for each 
violation.''

C. Enforcement Responses

    Because the enforcement provisions of section 1018 are clearly set 
forth in the statute, the final rule retains largely unchanged the 
discussion of the enforcement authority.
    However, it is EPA's and HUD's intent that outreach and compliance 
assistance 

[[Page 9078]]
will be a major component of the section 1018 compliance program so 
that individuals are fully informed of the new requirements and their 
obligations. EPA and HUD also intend to bring clarity and 
predictability to the enforcement process for section 1018, in 
acknowledgment of the large and diverse population affected by this 
rule. Concurrent with this rule's release, EPA will issue a short 
``Statement of Approach'' as it relates to ensuring compliance with the 
requirements of section 1018, for the information of the general 
public. This informational document will discuss the Agency's approach 
to the section 1018 compliance assurance program. EPA is also 
developing a policy for use by EPA enforcement personnel to achieve a 
common sense result between a particular violation of section 1018 and 
a particular enforcement response. This policy includes, but is not 
limited to, issuing notices of warning (without penalties) as 
appropriate to let people know that they are out of compliance and to 
give them an opportunity to come into compliance, while maintaining 
provisions that will ensure that willful and repeat violators are 
appropriately penalized. This result is reached in the context of an 
``Enforcement Response Policy'' (ERP), which EPA is developing 
separately for this rule.
    Regarding HUD enforcement actions, HUD's civil money penalty 
procedures are set out in 24 CFR part 30. These procedures include 
notices of intent to request civil money penalties, civil money penalty 
panels, administrative hearings and appeals, judicial review, and 
collection of penalties. A civil money penalty panel develops 
guidelines to determine the appropriate penalty for a violation of 
section 1018. These guidelines include the following factors: the 
gravity of the offense, awareness of procedures, any history of prior 
offenses, the ability to pay the penalty, the injury to the public, any 
benefits received by the violator, any potential benefits to other 
persons, deterrence of future violators, the violator's culpability, 
and such other matters as justice may require.

D. Civil Liability--Direct Compensation

    In addition to the EPA and HUD enforcement authority for the 
provisions of this final rule, section 1018(b)(3) of Title X states 
that ``[A]ny person who knowingly violates the provisions of this 
section shall be jointly and severally liable to the purchaser or 
lessee in an amount equal to 3 times the amount of damages incurred by 
such individual.'' This provision allows the purchaser or lessee to 
seek direct compensation for any damages incurred based on the seller's 
or lessor's noncompliance. Section 1018(b)(4) authorizes the court to 
award court costs, reasonable attorney fees, and expert witness fees to 
a prevailing plaintiff.

E. Validity of Contracts and Liens

    Section 1018(c) provides that nothing in section 1018 (or its 
implementing rules) ``shall affect the validity or enforceability of 
any sale or contract for the purchase and sale or lease of any interest 
in residential real property or any loan, loan agreement, mortgage, or 
lien made or arising in connection with a mortgage loan. . . .'' It 
also provides that nothing in section 1018 (or its implementing rules) 
shall ``create a defect in title.''
    EPA and HUD have looked at section 1018(c) in the context of other 
section 1018 provisions, which outline specific clauses that must be 
attached to contracts for the purchase and sale of target housing and 
specific procedural protections that must be given to the purchaser or 
lessee.
    The provisions of section 1018 cannot void or nullify the contract 
after ratification and cannot void any transfer of real estate, even if 
it can be proven that the seller or lessor violated section 1018 
provisions. In such circumstances, the purchaser or lessee is limited 
to the remedies provided in section 1018. Of course, traditional causes 
of action under State law would still exist, and possibly could be 
applied to some section 1018 violations. Also, violations of section 
1018 could be subject to civil and criminal penalties administered by 
EPA and HUD under section 1018(b).

VI. Federal Effect on State and Local Disclosure Requirements

    Several commenters noted that some States and municipalities 
already have requirements for the disclosure of information on lead-
based paint in housing. In developing the Federal disclosure 
requirements, several key questions have been raised regarding such 
programs: (1) Can States obtain authorization to administer and enforce 
their programs in lieu of the Federal program? and (2) What effect do 
the Federal requirements have on the ability of States to run their own 
programs?
    EPA and HUD have determined that Title X does not provide authority 
to delegate the administration and enforcement of these section 1018 
requirements to State programs. Where such authority to authorize State 
programs was anticipated by Congress (as in TSCA section 402), Congress 
provided specific authority.
    Where possible, EPA and HUD have developed these requirements to 
make it possible for State and Federal requirements to complement each 
other. For example, EPA and HUD had State programs in mind when adding 
flexibility in the development of disclosure and acknowledgment 
attachments.
    Finally, nothing in this rule is intended to relieve a seller, 
lessor, or agent from any responsibility for compliance with State or 
local laws, ordinances, codes, or regulations governing notice or 
disclosure of known lead-based paint and/or lead-based paint hazards.

VII. Summary of Regulatory Impact Analysis

    EPA and HUD have prepared a Regulatory Impact Analysis (RIA) that 
examines the potential costs, benefits, and impacts of regulations for 
the disclosure of known lead-based paint hazards in residential 
property upon the transfer of the property for sale or rental. The 
analysis is presented in five sections:
      Background and Framework for Analysis
      Profile of Sectors Affected
      Estimated Costs to Private Parties and Government
      Effect of the Lead-Based Paint Hazard Disclosure Rule for 
Real Estate Transfers on Small Businesses--Regulatory Flexibility 
Analysis
      Assessment of Benefits

A. Background and Framework for Analysis

    Those parties directly affected by the rule are the seller, lessor, 
agent, property manager, purchaser, and lessee. The required activities 
that impose regulatory burden on the affected parties fall into four 
categories for cost estimation purposes:
    1. Start-up costs, which include learning the rule's requirements 
and establishing compliance procedures;
    2. Disclosure costs, which refer to the costs resulting from the 
actual transfer of information and obtaining needed signatures;
    3. Recordkeeping costs, which result principally from the 
requirement that signed acknowledgment forms must be retained by the 
provider of the information; and
    4. Materials costs, which are linked primarily to the disclosure 
requirement, as the lead hazard information pamphlet must be purchased 
or photocopied (acknowledgment forms must also be duplicated). Costs 
may also be incurred 

[[Page 9079]]
for filing where a large number of acknowledgment statements or 
documents for disclosure are generated (e.g., by agents), though such 
burden was estimated to be quite modest.
    The requirements of section 1018 of the Act fall primarily on the 
seller or lessor of ``target housing,'' which is defined to be any 
housing constructed prior to 1978, except housing for the elderly or 
persons with disabilities (unless any child who is less than 6 years of 
age resides or is expected to reside in such housing) or any 0-bedroom 
dwelling. However, if an agent or property manager acts on behalf of 
the seller or lessor, which EPA and HUD have estimated to be the case 
in most transfers, responsibilities to ensure compliance fall to such 
agents or managers as well.
    To estimate the impacts of the rule, EPA and HUD sought data 
pertaining to the number of affected parties in each classification 
listed above, the frequency with which affected purchase and lease 
transactions are completed, and the incremental costs, in labor and 
materials, added to each transaction by the regulations.

B. Profile of Sectors Affected

    The larger of the two affected sectors expected to bear the 
principal effects of the rule falls within Standard Industrial 
Classification (SIC) code 651, Real Estate Operators and Lessors. EPA 
estimates there to be 92,000 establishments potentially affected by the 
rule. Also affected are business establishments falling within SIC code 
653, Real Estate Agents and Managers. An additional 92,000 
establishments could be affected by the rule in this sector.
    Employment data were obtained for the occupations most likely to be 
involved in transactions subject to the rule. EPA and HUD estimate that 
324,000 real estate agents and 243,000 property managers will be 
affected.
    With regard to transaction volume, 2.9 million sales transactions 
and 9.3 million rental transactions were estimated to occur annually in 
target housing.

C. Estimated Costs to Private Parties and Government

    Table 1 below summarizes the estimated annual costs associated with 
the rule. The four costs to private parties, or compliance costs, are 
discussed briefly below. Costs to government represent rule 
administration activities.
    The first private party cost category, start-up costs, represents 
about one-third of overall annual compliance costs. Factors affecting 
the magnitude of these costs include the number of employees having to 
familiarize themselves with the regulations, both initially (employees 
in the existing workforce) and over time (new entrants to the affected 
sectors); the time required to learn the activities that must be 
undertaken in order to comply; and the hourly compensation of affected 
employees.
    As Table 1 shows, disclosure event costs constitute the greatest 
portion of overall compliance costs. Factors affecting the magnitude of 
these costs include the frequencies of regulated events; the time 
involved in performing required activities, such as providing to the 
prospective purchaser/lessee the required information and obtaining the 
required signatures; and the hourly compensation of all involved 
parties. EPA and HUD also took into account the fact that a number of 
States have similar requirements pertaining to information transfer 
regarding potential lead hazards in the sale of residential property. 
Thus, an allowance was made in the burden estimates for transactions 
occurring in such States to reflect a certain level of current 
compliance.

 Table 1--Summary of Annual Costs of the Disclosure Rule for Residential
                            Property Transfer                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Estimated Annual Costs to Private Parties -                             
 Sales Transactions                                                     
Start-up Costs*                               $25.8 million             
Disclosure Event Costs                        20.2 million              
Recordkeeping Costs                           0.6 million               
Materials Costs                               2.8 million               
                                             ---------------------------
Total for Sales Transactions:                 $49.4 million             
                                                                        
Estimated Annual Costs to Private Parties -                             
 Rental Transactions                                                    
                                                                        
Start-up Costs*                               $ 1.1 million             
Disclosure Event Costs                        $25.6 million             
Recordkeeping Costs                           $1.9 million              
Materials Costs                               $3.4 million              
                                             ---------------------------
                                                                        
Total for Rental Transactions:                $32.0 million             
                                                                        
                                             ===========================
Total Estimated Annual Costs to Private       $81.4 million             
 Parties:                                                               
Costs to Government                                                     
Low Estimate                                  $2.4 million              
High Estimate                                  $4.3 million             
                                                                        
Total Estimated Annual Costs:                                           
Based on Low Estimate of Government Costs:    $83.8 million             
Based on High Estimate of Government Costs:   $85.7 million             
* First-year costs annualized at 3 percent                              
 rate over 6 years.                                                     
------------------------------------------------------------------------

    Recordkeeping and materials costs account for a relatively modest 
share of overall annual costs. Factors affecting the magnitude of these 
costs include the number of affected parties per transaction; the 
frequency of 

[[Page 9080]]
transactions, the costs of acquiring/duplicating documents, which 
include the lead hazard information pamphlet and signed acknowledgment 
forms; and costs to maintain documents.
    Additional, indirect costs resulting from actions taken by 
consumers in response to the information made available by the rule 
were not quantified, for reasons detailed in Unit VII.E. of this 
preamble.
    To administer the final regulation, resources will be required to 
conduct a number of activities, including: inspections; violation case 
management; establishment and maintenance of cooperative agreements; 
compliance assistance, development of performance measurement criteria; 
and management.

D. Effect of the Lead-Based Paint Hazard Disclosure Rule for Real 
Estate Transfers on Small Businesses--Regulatory Flexibility Analysis

    EPA and HUD investigated the potential impacts of the rule on small 
businesses and have prepared a Regulatory Flexibility Analysis (RFA). 
Although a large number of small establishments may be affected by the 
rule, cost impacts were not found to be of sufficient magnitude to 
cause undue harm to such establishments. The RFA is summarized 
separately in Unit X.B. of this preamble.

E. Assessment of Benefits

    The market imperfection that the rule is intended to correct is the 
lack of information available to prospective home purchasers and 
lessees concerning lead-based paint hazards in homes they may be 
considering for purchase or rent. Under the rule, general information 
about the risks associated with lead-based paint will be provided 
through the provision of a brochure. When available, information about 
the presence of or abatement of lead in the specific unit being 
considered for purchase or rent must also be disclosed (e.g., 
information concerning previous testing for the presence of lead-based 
paint, abatement history, etc.). The failure of the marketplace to 
provide this information or to provide prospective home purchasers and 
lessees the opportunity to develop such information means that 
prospective purchasers and lessees might purchase or lease a property, 
or make pricing or rental payment decisions regarding properties, 
without understanding possible lead-related health risks or risk 
management costs accompanying the transaction.
    EPA and HUD expect that this rulemaking will generate benefits by 
giving prospective home purchasers and lessees access to information 
that might otherwise have been unavailable (e.g., information 
pertaining to abatement activities for a specific residence) or that 
they might have been able to acquire only through their own effort and 
at some cost. In addition, EPA believes the information will generate 
health benefits by leading many purchasers and lessees to modify their 
behavior in a way that will reduce risks from lead-based paint. For 
example, purchasers could undertake abatement activities subsequent to 
taking ownership of a dwelling, change household cleaning practices, or 
request professional assistance when undertaking renovation activities. 
The rule may also prompt property owners, due to reluctance on the part 
of prospective purchasers/lessees to select housing containing lead-
based paint, to act to reduce lead-related hazards associated with 
their residential dwellings. Health benefits resulting from such 
activities are distinguishable from the more direct benefits of the 
rule, i.e., the value of improved information. Further, in cases where 
action is taken to remediate a lead-based paint hazard, additional 
costs would be incurred, and would have to be subtracted from the 
expected benefits associated with the remediation.
    EPA and HUD note that the regulation does not require actions to 
reduce lead-based paint hazards in residential housing. Thus, the 
extent to which lead exposure decreases depends upon how transaction 
participants (i.e., sellers/lessors and prospective purchasers/lessees) 
value and respond to the additional information.
    The RIA details three approaches that are evolving and that can be 
seen as a starting point in an effort to expand the level of 
understanding of how benefits from information products can be valued. 
However, an information base and the associated accepted analytical 
methods necessary to predict consumer reaction to information products 
on lead-based paint hazards are not readily available; thus, 
quantifying the expected benefits of this rule, either in terms of 
efficiency gains from improved decisionmaking or risk reduction, would 
be extremely difficult. Given the high level of uncertainty associated 
with the results from such a quantitative analysis, and given the 
prescriptive nature of section 1018 of the Act, EPA and HUD believe 
that the information provided in the qualitative analysis presented in 
the RIA served to inform decisionmaking.

VIII. Rulemaking Record

    A record for this final rule has been established for both EPA and 
HUD under docket number ``OPPTS-62130.'' The public version of this 
record for both agencies (which does not contain any information 
claimed as Confidential Business Information) is available for 
inspection from 12 noon to 4 p.m., Monday through Friday, excluding 
legal holidays. The public record is located in EPA's TSCA 
Nonconfidential Information Center (NCIC), Rm. NE-B607, 401 M St., SW., 
Washington, DC 20460.
    The docket contains reference works that EPA and HUD referred to in 
developing this regulation. In addition, other documents, including the 
Regulatory Impact Analysis, Information Collection Request, and copies 
of all comments on the proposed rule, are included in the docket for 
public review. The draft of the final rule submitted by EPA and HUD to 
OMB for review prior to the final rule's promulgation will also be 
contained in the docket.

IX. References

    1. Alliance to End Childhood Lead Poisoning, 1991. Preventing 
Childhood Lead Poisoning: The First Comprehensive National Conference; 
Final Report. Washington, DC.
    2. CDC, 1991. U.S. Centers for Disease Control and Prevention, 
Preventing Lead Poisoning in Young Children: A Statement by the Centers 
for Disease Control. Atlanta, GA.
    3. CPSC, 1977. Notice Reducing Allowable Levels of Lead in Lead-
Based Paint. Federal Register. September 1, 1977: 42 FR 44199.
    4. EPA, 1995. U.S. Environmental Protection Agency, Report on the 
National Survey of Lead-Based Paint in Housing: Base Report. 
Washington, DC: EPA747-R95-003.
    5. HUD, 1995. U.S. Department of Housing and Urban Development, 
Task Force on Lead-Based Paint Hazard Reduction and Financing, Putting 
the Pieces Together: Controlling Lead Hazards in the Nation's Housing: 
Final Report. Washington, DC: HUD-1542-LBP.
    6. HUD, 1990. Lead-Based Paint; Interim Guidelines for Hazard 
Identification and Abatement in Public and Indian Housing; Notice. 
Federal Register. April 18, 1990: 55 FR 14556.
    7. HUD, 1995. Department of Housing and Urban Development, 
Guidelines for the Evaluation and Control of Lead-Based Paint Hazards 
in Housing. Washington, DC.
    8. Pirkle, 1994. Pirkle, J.L., D.J. Brody, E.W. Gunter, R.A. 
Kramer, D.C. Paschal, 

[[Page 9081]]
K.M. Flegal, T.D. Matte, The Decline in Blood Lead Levels in the United 
States. Journal of the American Medical Association, 272(4): 284-291.

X. Regulatory Assessment Requirements

A. Executive Order 12866

    Pursuant to Executive Order 12866 (58 FR 51735, October 4, 1993), 
it has been determined that this is a ``significant regulatory action'' 
because of potential novel legal or policy issues arising out of the 
new legal mandates this action implements. This action was submitted to 
OMB for review, and any comments or changes made during that review 
have been documented in the public record.
    In addition, EPA and HUD have prepared a Regulatory Impact Analysis 
(RIA) in conjunction with their lead information disclosure rule for 
real estate transfers. EPA and HUD find that the rule will not have an 
effect on the economy of $100 million or more, will not result in major 
increases in costs or prices, and is not anticipated to have 
significant adverse effects on competition, employment, investment, or 
productivity in the relevant sectors.
    EPA and HUD estimate the overall costs to affected entities to be 
$81.4 million and costs to government to range from $2.4 to $4.3 
million. These estimates include costs for rule familiarization, 
information disclosure and obtaining required signatures, 
recordkeeping, materials costs, and government administration costs. 
EPA and HUD estimate that the provisions of the rule will add about 
$2.00 to $6.00 to the cost of each transaction.
    A copy of the RIA is available in the TSCA Public Docket Office for 
review and public comment. For information on the public docket, see 
Unit VIII. of this preamble, entitled Rulemaking Record.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
Federal agencies to consider whether a regulatory action will have an 
adverse economic impact on small entities. Section 605(b) requires the 
agencies to either certify that the regulatory action will not have a 
significant economic impact on a substantial number of small entities, 
or prepare a Regulatory Flexibility Analysis. Under the EPA policy that 
implements the Regulatory Flexibility Act, EPA performs a Regulatory 
Flexibility Analysis whenever a regulatory action is anticipated to 
have any economic impact on any small entities, and will also seek to 
involve these small entities in the development of the regulatory 
action to the extent possible. As such, in an effort to identify and 
characterize the rule's effects on small business, EPA and HUD have 
prepared a Regulatory Flexibility Analysis. This assessment has been 
included as part of the RIA and is summarized below.
    In preparing the RFA, EPA and HUD first developed an establishment 
profile for each major sector (SIC 651 and SIC 653). This profile 
indicated that approximately 75 percent of all establishments in SIC 
651 (Real Estate Operators and Lessors) and approximately 73 percent of 
all establishments in SIC 653 (Real Estate Agents and Managers) fell 
within the 1 to 4 employee size class. These proportions increased to 
90 percent and 87 percent, respectively, when employee size class 1 to 
9 was examined.
    To measure the cost impacts of the rule on these small 
establishments, representative or model establishments were designed. 
These model establishments corresponded to typical establishments in 
each affected sector, with respect to number of employees and annual 
transaction volume. Since transaction activity was reported to vary 
widely, a range of transaction volume was estimated for each 
establishment type.
    For each model establishment, annual regulatory costs were then 
calculated and compared to annual labor and overhead costs. Ratios were 
computed for both high and low estimates of the range of transaction 
activity. In the case of a real estate sales organization, regulatory 
costs were found to represent from 0.20 to 0.42 percent of labor and 
overhead costs. In the case of a rental establishment, impacts were 
slightly higher, ranging from 0.21 to 0.47 percent. An establishment 
engaged in both activities was projected to sustain impacts of 0.28 to 
0.63 percent.
    Thus, while a large number of small establishments will be 
potentially affected by the rule, cost impacts were not found to be of 
sufficient magnitude to cause undue harm to such establishments. 
Consequently, no regulatory alternatives are being proposed in 
connection with small business impacts.

C. Paperwork Reduction Act

    The information collection requirements in this rule have been 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request (ICR) document has been prepared by EPA 
(EPA ICR No. 1710.02) and a copy may be obtained from Sandy Farmer, 
OPPE Regulatory Information Division, Environmental Protection Agency 
(2136), 401 M St., SW., Washington, DC 20460 or by calling (202) 260-
2740. The information requirements are not effective until OMB approves 
them.
    The information collection requirements of this rule apply to 
sellers, lessors, and agents of target housing. Before selling or 
leasing target housing, the following information collection activities 
must occur: (1) Disclosure of known lead-based paint and/or lead-based 
paint hazards; (2) provision of any available records and reports 
pertaining to lead-based paint in the housing; (3) provision of a 
federally approved lead hazard information pamphlet; (4) completion and 
subsequent retention of disclosure and acknowledgment language for 3 
years, and (5) provision of a 10-day evaluation opportunity to 
purchasers before obligation under purchase contracts (this time period 
can be adjusted or waived by mutual consent).
    These requirements will help to: (1) Ensure that purchasers and 
renters of older housing make informed housing and maintenance 
decisions before they become obligated under purchase or lease 
contracts; (2) ensure that all participants in target housing sales and 
leasing transactions fully understand their rights and obligations 
under section 1018 and the implementing regulations; (3) document the 
completion of all disclosure activities by the responsible parties; and 
(4) provide a record of compliance for use by EPA and HUD enforcement 
officials. Under the authority of section 1018 of Title X, the 
information collection requirements of this rule are mandatory for all 
applicable sales and leasing transactions.
    The annual costs to private parties to comply with the requirements 
of the rule are estimated to be $81.4 million, with an associated 
burden of 7.1 million hours. Annual costs may be broken down into two 
components: Initialization or start-up costs, estimated to be $26.9 
million (annualized at 3 percent over 3 years); and costs for 
information disclosure and maintenance of records, estimated to be 
$54.5 million. Annual burden is estimated to be distributed among 35.1 
million responses, averaging 12.2 minutes per response. The number of 
respondents is estimated to be 15.5 million. Burden means the total 
time, effort, or financial resources expended by persons to generate, 
maintain, retain, or disclose or provide information to or for a 
Federal 

[[Page 9082]]
agency. This includes the time needed to review instructions; develop, 
acquire, install, and utilize technology and systems for the purposes 
of collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to respond to a 
collection of information; search data sources; complete and review the 
collection of information; and transmit or otherwise disclose the 
information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR Chapter 15. Upon OMB 
approval, EPA will issue a notice in the Federal Register to announce 
OMB's approval and to make a technical amendment to include a reference 
to this approval in 40 CFR part 9.
    Send comments on the burden estimates and any suggested methods for 
minimizing respondent burden, including through the use of automated 
collection techniques, to the Director, OPPE Regulatory Information 
Division, Environmental Protection Agency (2136), 401 M St., SW., 
Washington, DC 20460, and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, 725 17th St., NW., 
Washington, DC 20503, marked ``Attention: Desk Officer for EPA.'' 
Include the ICR number in any correspondence.

D. Environmental Impact

    In accordance with 40 CFR 1508.4 of the regulations of the Council 
on Environmental Quality and 24 CFR 50.19 and 50.20(o)(2) of the HUD 
regulations, the policies and procedures contained in this final rule 
relate only to information services and are, therefore, categorically 
excluded from the requirements of the National Environmental Policy 
Act.

E. HUD's Regulatory Agenda

    This rule was listed as Item No. 1517 in HUD's Semiannual Agenda of 
Regulations published on April 25, 1994 (59 FR 20424), in accordance 
with Executive Order 12866 and the Regulatory Flexibility Act, and was 
requested by and submitted to the Committee on Banking, Finance and 
Urban Affairs of the House of Representatives under section 7(o) of the 
Department of Housing and Urban Development Act.

F. Unfunded Mandates Reform Act

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, 
which the President signed into law on March 22, 1995, EPA and HUD have 
assessed the effects of this regulatory action on State, local, and 
tribal governments, and the private sector. This action is not an 
``unfunded mandate'' as defined by that statute and will not result in 
the expenditure of $100 million or more by any State, local, or tribal 
government, or by the private sector. Nevertheless, EPA and HUD 
consulted with several State, local, and tribal governments during the 
development.
    A copy of the RIA is available for public review. For information 
on the public docket, see Unit VIII. of this preamble, entitled 
Rulemaking Record.

List of Subjects in 24 CFR Part 35

    Environmental protection, Grant programs-housing and community 
development, Hazardous substances, Lead, Lead poisoning, Mortgage 
insurance, Rent subsidies, Reporting and recordkeeping requirements.

List of Subjects in 40 CFR Part 745

    Environmental protection, Hazardous substances, Lead, Recordkeeping 
and notification requirements.

    Dated: February 29, 1996.
Henry Cisneros,
Secretary, Department of Housing and Urban Development.

    Dated: February 29, 1996.
Carol M. Browner,
Administrator, Environmental Protection Agency.
    Therefore, 24 CFR subtitle A and 40 CFR Chapter I are amended as 
follows:

24 CFR Subtitle A

PART 35--LEAD-BASED PAINT POISONING PREVENTION IN CERTAIN 
RESIDENTIAL STRUCTURES

    1. The authority citation for part 35 is revised to read as 
follows:

    Authority: 42 U.S.C. 3535(d), 4821-4846 and 4852d.

    2. A new subpart H is added to part 35 to read as follows:
Subpart H--Disclosure of Known Lead-Based Paint and/or Lead-Based Paint 
Hazards Upon Sale or Lease of Residential Property
Sec.
35.80     Purpose.
35.82     Scope and applicability.
35.84     Effective dates.
35.86     Definitions.
35.88     Disclosure requirements for sellers and lessors.
35.90     Opportunity to conduct an evaluation.
35.92     Certification and acknowledgment of disclosure.
35.94     Agent responsibilities.
35.96     Enforcement.
35.98     Impact on State and local requirements.

Subpart H--Disclosure of Known Lead-Based Paint and/or Lead-Based Paint 
Hazards Upon Sale or Lease of Residential Property


Sec. 35.80   Purpose.

    This subpart implements the provisions of 42 U.S.C. 4852d, which 
impose certain requirements on the sale or lease of target housing. 
Under this subpart, a seller or lessor of target housing shall disclose 
to the purchaser or lessee the presence of any known lead-based paint 
and/or lead-based paint hazards; provide available records and reports; 
provide the purchaser or lessee with a lead hazard information 
pamphlet; give purchasers a 10-day opportunity to conduct a risk 
assessment or inspection; and attach specific disclosure and warning 
language to the sales or leasing contract before the purchaser or 
lessee is obligated under a contract to purchase or lease target 
housing.


Sec. 35.82   Scope and applicability.

    This subpart applies to all transactions to sell or lease target 
housing, including subleases, with the exception of the following:
    (a) Sales of target housing at foreclosure.
    (b) Leases of target housing that have been found to be lead-based 
paint free by an inspector certified under the Federal certification 
program or under a federally accredited State or tribal certification 
program. Until a Federal certification program or federally accredited 
State certification program is in place within the State, inspectors 
shall be considered qualified to conduct an inspection for this purpose 
if they have received certification under any existing State or tribal 
inspector certification program. The lessor has the option of using the 
results of additional test(s) by a certified inspector to confirm or 
refute a prior finding.
    (c) Short-term leases of 100 days or less, where no lease renewal 
or extension can occur.
    (d) Renewals of existing leases in target housing in which the 
lessor has previously disclosed all information required under 
Sec. 35.88 and where no new information described in Sec. 35.88 has 
come into the possession of the lessor. For the purposes of this 

[[Page 9083]]
paragraph, renewal shall include both renegotiation of existing lease 
terms and/or ratification of a new lease.


Sec. 35.84   Effective dates.

    The requirements in this subpart take effect in the following 
manner:
    (a) For owners of more than four residential dwellings, the 
requirements shall take effect on September 6, 1996.
    (b) For owners of one to four residential dwellings, the 
requirements shall take effect on December 6, 1996.


Sec. 35.86   Definitions.

    The following definitions apply to this subpart.
    The Act means the Residential Lead-Based Paint Hazard Reduction Act 
of 1992, 42 U.S.C. 4852d.
    Agent means any party who enters into a contract with a seller or 
lessor, including any party who enters into a contract with a 
representative of the seller or lessor, for the purpose of selling or 
leasing target housing. This term does not apply to purchasers or any 
purchaser's representative who receives all compensation from the 
purchaser.
    Available means in the possession of or reasonably obtainable by 
the seller or lessor at the time of the disclosure.
    Common area means a portion of a building generally accessible to 
all residents/users including, but not limited to, hallways, stairways, 
laundry and recreational rooms, playgrounds, community centers, and 
boundary fences.
    Contract for the purchase and sale of residential real property 
means any contract or agreement in which one party agrees to purchase 
an interest in real property on which there is situated one or more 
residential dwellings used or occupied, or intended to be used or 
occupied, in whole or in part, as the home or residence of one or more 
persons.
    EPA means the Environmental Protection Agency.
    Evaluation means a risk assessment and/or inspection.
    Foreclosure means any of the various methods, statutory or 
otherwise, known in different jurisdictions, of enforcing payment of a 
debt, by the taking and selling of real property.
    Housing for the elderly means retirement communities or similar 
types of housing reserved for households composed of one or more 
persons 62 years of age or more at the time of initial occupancy.
    Inspection means:
    (1) A surface-by-surface investigation to determine the presence of 
lead-based paint as provided in section 302(c) of the Lead-Based Paint 
Poisoning and Prevention Act [42 U.S.C. 4822], and
    (2) The provision of a report explaining the results of the 
investigation.
    Lead-based paint means paint or other surface coatings that contain 
lead equal to or in excess of 1.0 milligram per square centimeter or 
0.5 percent by weight.
    Lead-based paint free housing means target housing that has been 
found to be free of paint or other surface coatings that contain lead 
equal to or in excess of 1.0 milligram per square centimeter or 0.5 
percent by weight.
    Lead-based paint hazard means any condition that causes exposure to 
lead from lead-contaminated dust, lead-contaminated soil, or lead-
contaminated paint that is deteriorated or present in accessible 
surfaces, friction surfaces, or impact surfaces that would result in 
adverse human health effects as established by the appropriate Federal 
agency.
    Lessee means any entity that enters into an agreement to lease, 
rent, or sublease target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    Lessor means any entity that offers target housing for lease, rent, 
or sublease, including but not limited to individuals, partnerships, 
corporations, trusts, government agencies, housing agencies, Indian 
tribes, and nonprofit organizations.
    Owner means any entity that has legal title to target housing, 
including but not limited to individuals, partnerships, corporations, 
trusts, government agencies, housing agencies, Indian tribes, and 
nonprofit organizations, except where a mortgagee holds legal title to 
property serving as collateral for a mortgage loan, in which case the 
owner would be the mortgagor.
    Purchaser means an entity that enters into an agreement to purchase 
an interest in target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    Reduction means measures designed to reduce or eliminate human 
exposure to lead-based paint hazards through methods including interim 
controls and abatement.
    Residential dwelling means:
    (1) A single-family dwelling, including attached structures such as 
porches and stoops; or
    (2) A single-family dwelling unit in a structure that contains more 
than one separate residential dwelling unit, and in which each such 
unit is used or occupied, or intended to be used or occupied, in whole 
or in part, as the residence of one or more persons.
    Risk assessment means an on-site investigation to determine and 
report the existence, nature, severity, and location of lead-based 
paint hazards in residential dwellings, including:
    (1) Information gathering regarding the age and history of the 
housing and occupancy by children under age 6;
    (2) Visual inspection;
    (3) Limited wipe sampling or other environmental sampling 
techniques;
    (4) Other activity as may be appropriate; and
    (5) Provision of a report explaining the results of the 
investigation.
    Seller means any entity that transfers legal title to target 
housing, in whole or in part, in return for consideration, including 
but not limited to individuals, partnerships, corporations, trusts, 
government agencies, housing agencies, Indian tribes, and nonprofit 
organizations. The term ``seller'' also includes:
    (1) An entity that transfers shares in a cooperatively owned 
project, in return for consideration; and
    (2) An entity that transfers its interest in a leasehold, in 
jurisdictions or circumstances where it is legally permissible to 
separate the fee title from the title to the improvement, in return for 
consideration.
    Target housing means any housing constructed prior to 1978, except 
housing for the elderly or persons with disabilities (unless any child 
who is less than 6 years of age resides or is expected to reside in 
such housing) or any 0-bedroom dwelling.
    TSCA means the Toxic Substances Control Act, 15 U.S.C. 2601.
    0-bedroom dwelling means any residential dwelling in which the 
living area is not separated from the sleeping area. The term includes 
efficiencies, studio apartments, dormitory housing, military barracks, 
and rentals of individual rooms in residential dwellings.


Sec. 35.88   Disclosure requirements for sellers and lessors.

    (a) The following activities shall be completed before the 
purchaser or lessee is obligated under any contract to purchase or 
lease target housing that is not otherwise an exempt transaction 
pursuant to Sec. 35.82. Nothing in this section implies a positive 
obligation on the seller or lessor to conduct any evaluation or 
reduction activities.
    (1) The seller or lessor shall provide the purchaser or lessee with 
an EPA-approved lead hazard information 

[[Page 9084]]
pamphlet. Such pamphlets include the EPA document entitled Protect Your 
Family From Lead in Your Home (EPA #747-K-94-001) or an equivalent 
pamphlet that has been approved for use in that State by EPA.
    (2) The seller or lessor shall disclose to the purchaser or lessee 
the presence of any known lead-based paint and/or lead-based paint 
hazards in the target housing being sold or leased. The seller or 
lessor shall also disclose any additional information available 
concerning the known lead-based paint and/or lead-based paint hazards, 
such as the basis for the determination that lead-based paint and/or 
lead-based paint hazards exist, the location of the lead-based paint 
and/or lead-based paint hazards, and the condition of the painted 
surfaces.
    (3) The seller or lessor shall disclose to each agent the presence 
of any known lead-based paint and/or lead-based paint hazards in the 
target housing being sold or leased and the existence of any available 
records or reports pertaining to lead-based paint and/or lead-based 
paint hazards. The seller or lessor shall also disclose any additional 
information available concerning the known lead-based paint and/or 
lead-based paint hazards, such as the basis for the determination that 
lead-based paint and/or lead-based paint hazards exist, the location of 
the lead-based paint and/or lead-based paint hazards, and the condition 
of the painted surfaces.
    (4) The seller or lessor shall provide the purchaser or lessee with 
any records or reports available to the seller or lessor pertaining to 
lead-based paint and/or lead-based paint hazards in the target housing 
being sold or leased. This requirement includes records and reports 
regarding common areas. This requirement also includes records and 
reports regarding other residential dwellings in multifamily target 
housing, provided that such information is part of an evaluation or 
reduction of lead-based paint and/or lead-based paint hazards in the 
target housing as a whole.
    (b) If any of the disclosure activities identified in paragraph (a) 
of this section occurs after the purchaser or lessee has provided an 
offer to purchase or lease the housing, the seller or lessor shall 
complete the required disclosure activities prior to accepting the 
purchaser's or lessee's offer and allow the purchaser or lessee an 
opportunity to review the information and possibly amend the offer.


Sec. 35.90   Opportunity to conduct an evaluation.

    (a) Before a purchaser is obligated under any contract to purchase 
target housing, the seller shall permit the purchaser a 10-day period 
(unless the parties mutually agree, in writing, upon a different period 
of time) to conduct a risk assessment or inspection for the presence of 
lead-based paint and/or lead-based paint hazards.
    (b) Notwithstanding paragraph (a) of this section, a purchaser may 
waive the opportunity to conduct the risk assessment or inspection by 
so indicating in writing.


Sec. 35.92   Certification and acknowledgment of disclosure.

    (a) Seller requirements. Each contract to sell target housing shall 
include an attachment containing the following elements, in the 
language of the contract (e.g., English, Spanish):
    (1) A Lead Warning Statement consisting of the following language:

    Every purchaser of any interest in residential real property on 
which a residential dwelling was built prior to 1978 is notified 
that such property may present exposure to lead from lead-based 
paint that may place young children at risk of developing lead 
poisoning. Lead poisoning in young children may produce permanent 
neurological damage, including learning disabilities, reduced 
intelligence quotient, behavioral problems, and impaired memory. 
Lead poisoning also poses a particular risk to pregnant women. The 
seller of any interest in residential real property is required to 
provide the buyer with any information on lead-based paint hazards 
from risk assessments or inspections in the seller's possession and 
notify the buyer of any known lead-based paint hazards. A risk 
assessment or inspection for possible lead-based paint hazards is 
recommended prior to purchase.

    (2) A statement by the seller disclosing the presence of known 
lead-based paint and/or lead-based paint hazards in the target housing 
being sold or indicating no knowledge of the presence of lead-based 
paint and/or lead-based paint hazards. The seller shall also provide 
any additional information available concerning the known lead-based 
paint and/or lead-based paint hazards, such as the basis for the 
determination that lead-based paint and/or lead-based paint hazards 
exist, the location of the lead-based paint and/or lead-based paint 
hazards, and the condition of the painted surfaces.
    (3) A list of any records or reports available to the seller 
pertaining to lead-based paint and/or lead-based paint hazards in the 
housing that have been provided to the purchaser. If no such records or 
reports are available, the seller shall so indicate.
    (4) A statement by the purchaser affirming receipt of the 
information set out in paragraphs (a)(2) and (a)(3) of this section and 
the lead hazard information pamphlet required under section 15 U.S.C. 
2696.
    (5) A statement by the purchaser that he/she has either:
    (i) Received the opportunity to conduct the risk assessment or 
inspection required by Sec. 35.90(a); or
    (ii) Waived the opportunity.
    (6) When any agent is involved in the transaction to sell target 
housing on behalf of the seller, a statement that:
    (i) The agent has informed the seller of the seller's obligations 
under 42 U.S.C. 4852d; and
    (ii) The agent is aware of his/her duty to ensure compliance with 
the requirements of this subpart.
    (7) The signatures of the sellers, agents, and purchasers, 
certifying to the accuracy of their statements, to the best of their 
knowledge, along with the dates of signature.
    (b) Lessor requirements. Each contract to lease target housing 
shall include, as an attachment or within the contract, the following 
elements, in the language of the contract (e.g., English, Spanish):
    (1) A Lead Warning Statement with the following language:

    Housing built before 1978 may contain lead-based paint. Lead 
from paint, paint chips, and dust can pose health hazards if not 
managed properly. Lead exposure is especially harmful to young 
children and pregnant women. Before renting pre-1978 housing, 
lessors must disclose the presence of lead-based paint and/or lead-
based paint hazards in the dwelling. Lessees must also receive a 
federally approved pamphlet on lead poisoning prevention.

    (2) A statement by the lessor disclosing the presence of known 
lead-based paint and/or lead-based paint hazards in the target housing 
being leased or indicating no knowledge of the presence of lead-based 
paint and/or lead-based paint hazards. The lessor shall also disclose 
any additional information available concerning the known lead-based 
paint and/or lead-based paint hazards, such as the basis for the 
determination that lead-based paint and/or lead-based paint hazards 
exist in the housing, the location of the lead-based paint and/or lead-
based paint hazards, and the condition of the painted surfaces.
    (3) A list of any records or reports available to the lessor 
pertaining to lead-based paint and/or lead-based paint hazards in the 
housing that have been provided to the lessee. If no such records or 
reports are available, the lessor shall so indicate.

[[Page 9085]]

    (4) A statement by the lessee affirming receipt of the information 
set out in paragraphs (b)(2) and (b)(3) of this section and the lead 
hazard information pamphlet required under 15 U.S.C. 2696.
    (5) When any agent is involved in the transaction to lease target 
housing on behalf of the lessor, a statement that:
    (i) The agent has informed the lessor of the lessor's obligations 
under 42 U.S.C. 4852d; and
    (ii) The agent is aware of his/her duty to ensure compliance with 
the requirements of this subpart.
    (6) The signatures of the lessors, agents, and lessees certifying 
to the accuracy of their statements to the best of their knowledge, 
along with the dates of signature.
    (c) Retention of certification and acknowledgment information.
    (1) The seller, and any agent, shall retain a copy of the completed 
attachment required under paragraph (a) of this section for no less 
than 3 years from the completion date of the sale. The lessor, and any 
agent, shall retain a copy of the completed attachment or lease 
contract containing the information required under paragraph (b) of 
this section for no less than 3 years from the commencement of the 
leasing period.
    (2) This recordkeeping requirement is not intended to place any 
limitations on civil suits under the Act, or to otherwise affect a 
lessee's or purchaser's rights under the civil penalty provisions of 42 
U.S.C. 4852d(b)(3).
    (d) The seller, lessor, or agent shall not be responsible for the 
failure of a purchaser's or lessee's legal representative (where such 
representative receives all compensation from the purchaser or lessee) 
to transmit disclosure materials to the purchaser or lessee, provided 
that all required parties have completed and signed the necessary 
certification and acknowledgment language required under paragraphs (a) 
and (b) of this section.


Sec. 35.94   Agent responsibilities.

    (a) Each agent shall ensure compliance with all requirements of 
this subpart. To ensure compliance, the agent shall:
    (1) Inform the seller or lessor of his/her obligations under 
Secs. 35.88, 35.90, and 35.92.
    (2) Ensure that the seller or lessor has performed all activities 
required under Secs. 35.88, 35.90, and 35.92, or personally ensure 
compliance with the requirements of Secs. 35.88, 35.90, and 35.92.
    (b) If the agent has complied with paragraph (a)(1) of this 
section, the agent shall not be liable for the failure to disclose to a 
purchaser or lessee the presence of lead-based paint and/or lead-based 
paint hazards known by a seller or lessor but not disclosed to the 
agent.


Sec. 35.96   Enforcement.

    (a) Any person who knowingly fails to comply with any provision of 
this subpart shall be subject to civil monetary penalties in accordance 
with the provisions of 42 U.S.C. 3545 and 24 CFR part 30.
    (b) The Secretary is authorized to take such action as may be 
necessary to enjoin any violation of this subpart in the appropriate 
Federal district court.
    (c) Any person who knowingly violates the provisions of this 
subpart shall be jointly and severally liable to the purchaser or 
lessee in an amount equal to 3 times the amount of damages incurred by 
such individual.
    (d) In any civil action brought for damages pursuant to 42 U.S.C. 
4852d(b)(3), the appropriate court may award court costs to the party 
commencing such action, together with reasonable attorney fees and any 
expert witness fees, if that party prevails.
    (e) Failure or refusal to comply with Secs. 35.88 (disclosure 
requirements for sellers and lessors), Sec. 35.90 (opportunity to 
conduct an evaluation), Sec. 35.92 (certification and acknowledgment of 
disclosure), or Sec. 35.94 (agent responsibilities) is a violation of 
42 U.S.C. 4852d(b)(5) and of TSCA section 409 (15 U.S.C. 2689).
    (f) Violators may be subject to civil and criminal sanctions 
pursuant to TSCA section 16 (15 U.S.C. 2615) for each violation. For 
purposes of enforcing this subpart, the penalty for each violation 
applicable under 15 U.S.C. 2615 shall be not more than $10,000.


Sec. 35.98 Impact on State and local requirements.

    Nothing in this subpart shall relieve a seller, lessor, or agent 
from any responsibility for compliance with State or local laws, 
ordinances, codes, or regulations governing notice or disclosure of 
known lead-based paint and/or lead-based paint hazards. Neither HUD nor 
EPA assumes any responsibility for ensuring compliance with such State 
or local requirements.

40 CFR Chapter I

    1. Part 745 is added to read as follows:

PART 745-LEAD-BASED PAINT POISIONING PREVENTION IN CERTAIN 
RESIDENTIAL STRUCTURES

Subparts A--E [Reserved]
Subpart F -- Disclosure of Known Lead-Based Paint and/or Lead-Based 
Paint Hazards Upon Sale or Lease of Residential Property
Sec.
745.100    Purpose.
745.101    Scope and applicability.
745.102    Effective dates.
745.103    Definitions.
745.107    Disclosure requirements for sellers and lessors.
745.110    Opportunity to conduct an evaluation.
745.113    Certification and acknowledgment of disclosure.
745.115    Agent responsibilities.
745.118    Enforcement.
745.119    Impact on State and local requirements.

    Authority: 15 U.S.C. 2615, 15 U.S.C. 2689, and 42 U.S.C. 4852d.

Subparts A--E [Reserved]

Subpart F--Disclosure of Known Lead-Based Paint and/or Lead-Based 
Paint Hazards Upon Sale or Lease of Residential Property


Sec. 745.100   Purpose.

    This subpart implements the provisions of 42 U.S.C. 4852d, which 
impose certain requirements on the sale or lease of target housing. 
Under this subpart, a seller or lessor of target housing shall disclose 
to the purchaser or lessee the presence of any known lead-based paint 
and/or lead-based paint hazards; provide available records and reports; 
provide the purchaser or lessee with a lead hazard information 
pamphlet; give purchasers a 10-day opportunity to conduct a risk 
assessment or inspection; and attach specific disclosure and warning 
language to the sales or leasing contract before the purchaser or 
lessee is obligated under a contract to purchase or lease target 
housing.


Sec. 745.101   Scope and applicability.

    This subpart applies to all transactions to sell or lease target 
housing, including subleases, with the exception of the following:
    (a) Sales of target housing at foreclosure.
    (b) Leases of target housing that have been found to be lead-based 
paint free by an inspector certified under the Federal certification 
program or under a federally accredited State or tribal certification 
program. Until a Federal certification program or federally accredited 
State certification program is 

[[Page 9086]]
in place within the State, inspectors shall be considered qualified to 
conduct an inspection for this purpose if they have received 
certification under any existing State or tribal inspector 
certification program. The lessor has the option of using the results 
of additional test(s) by a certified inspector to confirm or refute a 
prior finding.
    (c) Short-term leases of 100 days or less, where no lease renewal 
or extension can occur.
    (d) Renewals of existing leases in target housing in which the 
lessor has previously disclosed all information required under 
Sec. 745.107 and where no new information described in Sec. 745.107 has 
come into the possession of the lessor. For the purposes of this 
paragraph, renewal shall include both renegotiation of existing lease 
terms and/or ratification of a new lease.


Sec. 745.102   Effective dates.

    The requirements in this subpart take effect in the following 
manner:
    (a) For owners of more than four residential dwellings, the 
requirements shall take effect on September 6, 1996.
    (b) For owners of one to four residential dwellings, the 
requirements shall take effect on December 6, 1996.


Sec. 745.103   Definitions.

    The following definitions apply to this subpart.
    The Act means the Residential Lead-Based Paint Hazard Reduction Act 
of 1992, 42 U.S.C. 4852d.
    Agent means any party who enters into a contract with a seller or 
lessor, including any party who enters into a contract with a 
representative of the seller or lessor, for the purpose of selling or 
leasing target housing. This term does not apply to purchasers or any 
purchaser's representative who receives all compensation from the 
purchaser.
    Available means in the possession of or reasonably obtainable by 
the seller or lessor at the time of the disclosure.
    Common area means a portion of a building generally accessible to 
all residents/users including, but not limited to, hallways, stairways, 
laundry and recreational rooms, playgrounds, community centers, and 
boundary fences.
    Contract for the purchase and sale of residential real property 
means any contract or agreement in which one party agrees to purchase 
an interest in real property on which there is situated one or more 
residential dwellings used or occupied, or intended to be used or 
occupied, in whole or in part, as the home or residence of one or more 
persons.
    EPA means the Environmental Protection Agency.
    Evaluation means a risk assessment and/or inspection.
    Foreclosure means any of the various methods, statutory or 
otherwise, known in different jurisdictions, of enforcing payment of a 
debt, by the taking and selling of real property.
    Housing for the elderly means retirement communities or similar 
types of housing reserved for households composed of one or more 
persons 62 years of age or more at the time of initial occupancy.
    HUD means the U.S. Department of Housing and Urban Development.
    Inspection means:
    (1) A surface-by-surface investigation to determine the presence of 
lead-based paint as provided in section 302(c) of the Lead-Based Paint 
Poisoning and Prevention Act [42 U.S.C. 4822], and
    (2) The provision of a report explaining the results of the 
investigation.
    Lead-based paint means paint or other surface coatings that contain 
lead equal to or in excess of 1.0 milligram per square centimeter or 
0.5 percent by weight.
    Lead-based paint free housing means target housing that has been 
found to be free of paint or other surface coatings that contain lead 
equal to or in excess of 1.0 milligram per square centimeter or 0.5 
percent by weight.
    Lead-based paint hazard means any condition that causes exposure to 
lead from lead-contaminated dust, lead-contaminated soil, or lead-
contaminated paint that is deteriorated or present in accessible 
surfaces, friction surfaces, or impact surfaces that would result in 
adverse human health effects as established by the appropriate Federal 
agency.
    Lessee means any entity that enters into an agreement to lease, 
rent, or sublease target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    Lessor means any entity that offers target housing for lease, rent, 
or sublease, including but not limited to individuals, partnerships, 
corporations, trusts, government agencies, housing agencies, Indian 
tribes, and nonprofit organizations.
    Owner means any entity that has legal title to target housing, 
including but not limited to individuals, partnerships, corporations, 
trusts, government agencies, housing agencies, Indian tribes, and 
nonprofit organizations, except where a mortgagee holds legal title to 
property serving as collateral for a mortgage loan, in which case the 
owner would be the mortgagor.
    Purchaser means an entity that enters into an agreement to purchase 
an interest in target housing, including but not limited to 
individuals, partnerships, corporations, trusts, government agencies, 
housing agencies, Indian tribes, and nonprofit organizations.
    Reduction means measures designed to reduce or eliminate human 
exposure to lead-based paint hazards through methods including interim 
controls and abatement.
    Residential dwelling means:
    (1) A single-family dwelling, including attached structures such as 
porches and stoops; or
    (2) A single-family dwelling unit in a structure that contains more 
than one separate residential dwelling unit, and in which each such 
unit is used or occupied, or intended to be used or occupied, in whole 
or in part, as the residence of one or more persons.
    Risk assessment means an on-site investigation to determine and 
report the existence, nature, severity, and location of lead-based 
paint hazards in residential dwellings, including:
    (1) Information gathering regarding the age and history of the 
housing and occupancy by children under age 6;
    (2) Visual inspection;
    (3) Limited wipe sampling or other environmental sampling 
techniques;
    (4) Other activity as may be appropriate; and
    (5) Provision of a report explaining the results of the 
investigation.
    Secretary means the Secretary of Housing and Urban Development.
    Seller means any entity that transfers legal title to target 
housing, in whole or in part, in return for consideration, including 
but not limited to individuals, partnerships, corporations, trusts, 
government agencies, housing agencies, Indian tribes, and nonprofit 
organizations. The term ``seller'' also includes:
    (1) An entity that transfers shares in a cooperatively owned 
project, in return for consideration; and
    (2) An entity that transfers its interest in a leasehold, in 
jurisdictions or circumstances where it is legally permissible to 
separate the fee title from the title to the improvement, in return for 
consideration.
    Target housing means any housing constructed prior to 1978, except 
housing for the elderly or persons with disabilities (unless any child 
who is less than 6 years of age resides or is expected to reside in 
such housing) or any 0-bedroom dwelling.
    TSCA means the Toxic Substances Control Act, 15 U.S.C. 2601.
    
[[Page 9087]]

    0-bedroom dwelling means any residential dwelling in which the 
living area is not separated from the sleeping area. The term includes 
efficiencies, studio apartments, dormitory housing, military barracks, 
and rentals of individual rooms in residential dwellings.


Sec. 745.107   Disclosure requirements for sellers and lessors.

    (a) The following activities shall be completed before the 
purchaser or lessee is obligated under any contract to purchase or 
lease target housing that is not otherwise an exempt transaction 
pursuant to Sec. 745.101. Nothing in this section implies a positive 
obligation on the seller or lessor to conduct any evaluation or 
reduction activities.
    (1) The seller or lessor shall provide the purchaser or lessee with 
an EPA-approved lead hazard information pamphlet. Such pamphlets 
include the EPA document entitled Protect Your Family From Lead in Your 
Home (EPA #747-K-94-001) or an equivalent pamphlet that has been 
approved for use in that State by EPA.
    (2) The seller or lessor shall disclose to the purchaser or lessee 
the presence of any known lead-based paint and/or lead-based paint 
hazards in the target housing being sold or leased. The seller or 
lessor shall also disclose any additional information available 
concerning the known lead-based paint and/or lead-based paint hazards, 
such as the basis for the determination that lead-based paint and/or 
lead-based paint hazards exist, the location of the lead-based paint 
and/or lead-based paint hazards, and the condition of the painted 
surfaces.
    (3) The seller or lessor shall disclose to each agent the presence 
of any known lead-based paint and/or lead-based paint hazards in the 
target housing being sold or leased and the existence of any available 
records or reports pertaining to lead-based paint and/or lead-based 
paint hazards. The seller or lessor shall also disclose any additional 
information available concerning the known lead-based paint and/or 
lead-based paint hazards, such as the basis for the determination that 
lead-based paint and/or lead-based paint hazards exist, the location of 
the lead-based paint and/or lead-based paint hazards, and the condition 
of the painted surfaces.
    (4) The seller or lessor shall provide the purchaser or lessee with 
any records or reports available to the seller or lessor pertaining to 
lead-based paint and/or lead-based paint hazards in the target housing 
being sold or leased. This requirement includes records or reports 
regarding common areas. This requirement also includes records or 
reports regarding other residential dwellings in multifamily target 
housing, provided that such information is part of an evaluation or 
reduction of lead-based paint and/or lead-based paint hazards in the 
target housing as a whole.
    (b) If any of the disclosure activities identified in paragraph (a) 
of this section occurs after the purchaser or lessee has provided an 
offer to purchase or lease the housing, the seller or lessor shall 
complete the required disclosure activities prior to accepting the 
purchaser's or lessee's offer and allow the purchaser or lessee an 
opportunity to review the information and possibly amend the offer.


Sec. 745.110   Opportunity to conduct an evaluation.

    (a) Before a purchaser is obligated under any contract to purchase 
target housing, the seller shall permit the purchaser a 10-day period 
(unless the parties mutually agree, in writing, upon a different period 
of time) to conduct a risk assessment or inspection for the presence of 
lead-based paint and/or lead-based paint hazards.
    (b) Not withstanding paragraph (a) of this section, a purchaser may 
waive the opportunity to conduct the risk assessment or inspection by 
so indicating in writing.


Sec. 745.113   Certification and acknowledgment of disclosure.

    (a) Seller requirements. Each contract to sell target housing shall 
include an attachment containing the following elements, in the 
language of the contract (e.g., English, Spanish):
    (1) A Lead Warning Statement consisting of the following language:

    Every purchaser of any interest in residential real property on 
which a residential dwelling was built prior to 1978 is notified 
that such property may present exposure to lead from lead-based 
paint that may place young children at risk of developing lead 
poisoning. Lead poisoning in young children may produce permanent 
neurological damage, including learning disabilities, reduced 
intelligence quotient, behavioral problems, and impaired memory. 
Lead poisoning also poses a particular risk to pregnant women. The 
seller of any interest in residential real property is required to 
provide the buyer with any information on lead-based paint hazards 
from risk assessments or inspections in the seller's possession and 
notify the buyer of any known lead-based paint hazards. A risk 
assessment or inspection for possible lead-based paint hazards is 
recommended prior to purchase.

    (2) A statement by the seller disclosing the presence of known 
lead-based paint and/or lead-based paint hazards in the target housing 
being sold or indicating no knowledge of the presence of lead-based 
paint and/or lead-based paint hazards. The seller shall also provide 
any additional information available concerning the known lead-based 
paint and/or lead-based paint hazards, such as the basis for the 
determination that lead-based paint and/or lead-based paint hazards 
exist, the location of the lead-based paint and/or lead-based paint 
hazards, and the condition of the painted surfaces.
    (3) A list of any records or reports available to the seller 
pertaining to lead-based paint and/or lead-based paint hazards in the 
housing that have been provided to the purchaser. If no such records or 
reports are available, the seller shall so indicate.
    (4) A statement by the purchaser affirming receipt of the 
information set out in paragraphs (a)(2) and (a)(3) of this section and 
the lead hazard information pamphlet required under 15 U.S.C. 2696.
    (5) A statement by the purchaser that he/she has either:
    (i) Received the opportunity to conduct the risk assessment or 
inspection required by Sec. 745.110(a); or
    (ii) Waived the opportunity.
    (6) When one or more agents are involved in the transaction to sell 
target housing on behalf of the seller, a statement that:
    (i) The agent has informed the seller of the seller's obligations 
under 42 U.S.C. 4852d; and
    (ii) The agent is aware of his/her duty to ensure compliance with 
the requirements of this subpart.
    (7) The signatures of the sellers, agents, and purchasers 
certifying to the accuracy of their statements to the best of their 
knowledge, along with the dates of signature.
    (b) Lessor requirements. Each contract to lease target housing 
shall include, as an attachment or within the contract, the following 
elements, in the language of the contract (e.g., English, Spanish):
    (1) A Lead Warning Statement with the following language:

    Housing built before 1978 may contain lead-based paint. Lead 
from paint, paint chips, and dust can pose health hazards if not 
managed properly. Lead exposure is especially harmful to young 
children and pregnant women. Before renting pre-1978 housing, 
lessors must disclose the presence of lead-based paint and/or lead-
based paint hazards in the dwelling. Lessees must also receive a 
federally approved pamphlet on lead poisoning prevention.

    (2) A statement by the lessor disclosing the presence of known 
lead-based paint and/or lead-based paint 

[[Page 9088]]
hazards in the target housing being leased or indicating no knowledge 
of the presence of lead-based paint and/or lead-based paint hazards. 
The lessor shall also disclose any additional information available 
concerning the known lead-based paint and/or lead-based paint hazards, 
such as the basis for the determination that lead-based paint and/or 
lead-based paint hazards exist, the location of the lead-based paint 
and/or lead-based paint hazards, and the condition of the painted 
surfaces.
    (3) A list of any records or reports available to the lessor 
pertaining to lead-based paint and/or lead-based paint hazards in the 
housing that have been provided to the lessee. If no such records or 
reports are available, the lessor shall so indicate.
    (4) A statement by the lessee affirming receipt of the information 
set out in paragraphs (b)(2) and (b)(3) of this section and the lead 
hazard information pamphlet required under 15 U.S.C. 2696.
    (5) When one or more agents are involved in the transaction to 
lease target housing on behalf of the lessor, a statement that:
    (i) The agent has informed the lessor of the lessors obligations 
under 42 U.S.C. 4852d; and
    (ii) The agent is aware of his/her duty to ensure compliance with 
the requirements of this subpart.
    (6) The signatures of the lessors, agents, and lessees, certifying 
to the accuracy of their statements, to the best of their knowledge, 
along with the dates of signature.
    (c) Retention of Certification and Acknowledgment Information.
    (1) The seller, and any agent, shall retain a copy of the completed 
attachment required under paragraph (a) of this section for no less 
than 3 years from the completion date of the sale. The lessor, and any 
agent, shall retain a copy of the completed attachment or lease 
contract containing the information required under paragraph (b) of 
this section for no less than 3 years from the commencement of the 
leasing period.
    (2) This recordkeeping requirement is not intended to place any 
limitations on civil suits under the Act, or to otherwise affect a 
lessee's or purchaser's rights under the civil penalty provisions of 42 
U.S.C. 4852d(b)(3).
    (d) The seller, lessor, or agent shall not be responsible for the 
failure of a purchaser's or lessee's legal representative (where such 
representative receives all compensation from the purchaser or lessee) 
to transmit disclosure materials to the purchaser or lessee, provided 
that all required parties have completed and signed the necessary 
certification and acknowledgment language required under paragraphs (a) 
and (b) of this section.


Sec. 745.115   Agent responsibilities.

    (a) Each agent shall ensure compliance with all requirements of 
this subpart. To ensure compliance, the agent shall:
    (1) Inform the seller or lessor of his/her obligations under 
Secs. 745.107, 745.110, and 745.113.
    (2) Ensure that the seller or lessor has performed all activities 
required under Secs. 745.107, 745.110, and 745.113, or personally 
ensure compliance with the requirements of Secs. 745.107, 745.110, and 
745.113.
    (b) If the agent has complied with paragraph (a)(1) of this 
section, the agent shall not be liable for the failure to disclose to a 
purchaser or lessee the presence of lead-based paint and/or lead-based 
paint hazards known by a seller or lessor but not disclosed to the 
agent.


Sec. 745.118   Enforcement.

    (a) Any person who knowingly fails to comply with any provision of 
this subpart shall be subject to civil monetary penalties in accordance 
with the provisions of 42 U.S.C. 3545 and 24 CFR part 30.
    (b) The Secretary is authorized to take such action as may be 
necessary to enjoin any violation of this subpart in the appropriate 
Federal district court.
    (c) Any person who knowingly violates the provisions of this 
subpart shall be jointly and severally liable to the purchaser or 
lessee in an amount equal to 3 times the amount of damages incurred by 
such individual.
    (d) In any civil action brought for damages pursuant to 42 U.S.C. 
4852d(b)(3), the appropriate court may award court costs to the party 
commencing such action, together with reasonable attorney fees and any 
expert witness fees, if that party prevails.
    (e) Failure or refusal to comply with Sec. 745.107 (disclosure 
requirements for sellers and lessors), Sec. 745.110 (opportunity to 
conduct an evaluation), Sec. 745.113 (certification and acknowledgment 
of disclosure), or Sec. 745.115 (agent responsibilities) is a violation 
of 42 U.S.C. 4852d(b)(5) and of TSCA section 409 (15 U.S.C. 2689).
    (f) Violators may be subject to civil and criminal sanctions 
pursuant to TSCA section 16 (15 U.S.C. 2615) for each violation. For 
purposes of enforcing this subpart, the penalty for each violation 
applicable under 15 U.S.C. 2615 shall be not more than $10,000.


Sec. 745.119   Impact on State and local requirements.

    Nothing in this subpart shall relieve a seller, lessor, or agent 
from any responsibility for compliance with State or local laws, 
ordinances, codes, or regulations governing notice or disclosure of 
known lead-based paint or lead-based paint hazards. Neither HUD nor EPA 
assumes any responsibility for ensuring compliance with such State or 
local requirements.
[FR Doc. 96-5243 Filed 3-5-96; 8:45 am]
BILLING CODE 6560-50-F