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Sweet v. Sheahan: Landlord Violated Lead-Based Paint Disclosure Regulations

In an unusual and unprecedented ruling, a federal court in New York recently found that a landlord violated the Federal lead-based paint disclosure requirements by failing to make disclosures to a tenant prior to the effective date of the HUD and EPA final disclosure regulations.

Robert Sheahan (“Landlord”) leased an apartment to Nancy Sweet (“Tenant”). The term of the lease was from December 1, 1995 until October 1996, and the lease was terminated in October 1996. The Landlord never disclosed to the Tenant the presence of lead-based paint in the apartment.

In 1999, the Tenant filed a lawsuit against the Landlord and various lead-based paint manufacturers for injuries allegedly suffered by her infant son during their occupancy of the apartment. She claimed that the Landlord had violated the federal Residential Lead-Based Paint Hazard Reduction Act (“Act”) because he didn’t disclose the presence of lead-based paint in the premises to her. Her allegations against the manufacturers were based on her son’s alleged injuries.

Congress enacted the Act in 1992. The Act directed HUD and the EPA to create disclosure regulations “no later” than October 28, 1994. The Act also stated that the disclosure requirements would take effect three years from the Act’s enactment, or October 28, 1995. The Act set forth the essential elements of the lead-based paint disclosure regulations, which require: that an owner or lessor of property must provide to the purchaser or lessee a lead hazard information pamphlet; disclose to the purchaser or lessee the presence of any known lead-based paint hazards; and permit the purchaser a ten-day period to perform an inspection.

HUD and the EPA proposed regulations on November 2, 1994. Proposed regulations have no legal effect. After a period of comment, the final regulations were issued on March 6, 1996 (which was after Tenant had vacated the Landlord’s property.). The Regulations did not take effect for lessors like the Landlord until December 6, 1996.

The Landlord moved to dismiss the Tenant’s lawsuit. He argued that the final lead-based paint Regulations did not require him to make disclosures to new tenants until December 6, 1996. Since Landlord and Tenant had entered into the lease prior to the effective date of the regulations, and in fact, the Tenant’s lease had expired by the time the final HUD/EPA Regulations were in effect, the Landlord argued that he had no duty to comply with the Regulations and disclose the presence of lead-based paint on his property to the Tenant, and hence, the Tenant’s lawsuit should be dismissed

The United States District Court for the Northern District of New York found that the Landlord had violated the Act if he had failed to disclose the presence of lead-based paint to the Tenant. The court ruled that the date specified by Congress in the Act established when disclosure requirements became effective October 28, 1995, and that it would not apply the effective date specified in the HUD and EPA Regulations because that contravened the intention of Congress found in the Act. The court also found that holding the Landlord to an earlier disclosure date than found in the HUD and EPA Regulations did not constitute a retroactive punishment. It stated that in the Act, Congress set forth both the effective date of the disclosure regulations as well as the information to be disclosed. Thus, the enforcement of the earlier date did not unjustly punish the Landlord.

Sweet v. Sheahan, No. 97-CV-1666, 1999 WL 1011921, rev'd 235 F.3d 80 (N.D.N.Y. 1999). To read a summary of this case, click here.

Note: The trial court has certified its ruling for appeal to the Second Circuit Court of Appeals, a request NAR supported.

To learn everything that you need to know to be in compliance with the HUD/EPA disclosure regulations, click here.

UPDATE- Sweet Decision Reversed

A federal appeals has ruled that the time periods set forth in guidelines published by HUD and the EPA are when landowners were to have started making lead-based paint disclosures, not the dates listed in the Congressional legislation. To read the earlier summary of this case posted in The Letter of the Law and a more thorough discussion of the facts, click here. In addition to the lead-based paint topic, this decision is of interest to anyone who follows developments in the field of administrative law.

Congress enacted the Residential Lead-Based Paint Hazard Reduction Act (“Act”) in 1992, and the Act directed the Department of Housing and Urban Development and the Environmental Protection Agency ("Agencies") to create disclosure regulations “no later” than October 28, 1994. The Act also stated that the disclosure requirements would take effect three years from the Act’s enactment, or October 28, 1995. The Agencies issued proposed regulations on November 2, 1994. After a period of comment, the final regulations were issued on March 6, 1996.

Nancy Sweet ("Tenant") leased an apartment from Robert Sheahan ("Landlord") from December 1, 1995 until October 1996. The Landlord made no lead-based paint disclosures to the Tenant. Under the regulations promulgated by the Agencies, the Landlord was not required to make the required lead-based paint disclosures until December 6, 1996. The trial court ruled that the Landlord was required to make disclosures to the Tenant by the dates established by Congress, not the dates promulgated by the Agencies. The trial court then certified this ruling for appeal.

The United States Court of Appeals, Second Circuit, ruled that the dates promulgated by the Agencies were the required disclosure dates, and so reversed the trial court's ruling. The court used three bases in reaching its decision that the December 6, 1996 was the date that the Landlord was required to make disclosures. First, the court found that the plain language of the Act created no independent disclosure obligations on property owners; instead, the Act said that the Agencies would be responsible for creating these disclosure deadlines. Without the regulations promulgated by the Agencies, it would be unclear to landowners what their disclosure obligations were under the Act. Therefore, until the final regulations became effective, landowners had no disclosure obligations.

Second, the court refused to retroactively apply the final regulations upon the Landlord. A retroactive application of the regulations would occur because the dates in the Act were before the regulations promulgated by the Agencies became final. As stated above, the Landlord's disclosure obligations were unknown until the regulations became final. Courts do not presume that legislation is intended to be applied retroactively, and since nothing in the Act called for such a retroactive application, this court refused to construe the Act in such a way. Additionally, the court stated that it was unfair to punish the Landlord for the failure of the Agencies to publish final regulations within the time frame established by Congress.

Finally, the court ruled that because the Agencies imposed additional obligations upon landowners, the Agencies were engaged in legislative rulemaking, and so the final regulations were entitled to receive substantial judicial deference. Based on all of these reasons, the court ruled that the Landlord had no lead-based paint disclosure duties until the times established in the regulations promulgated by the Agencies; thus, the court reversed the trial court and ordered that the Tenant's lawsuit against the Landlord be dismissed.

Sweet v. Sheahan, 235 F.3d 80 (2d Cir. 2000).

Editor's Note: NAR Legal Affairs, with the support of the Legal Action Committee, submitted an amicus curiae brief on behalf of NAR and IREM seeking reversal of the trial court's decision.

To learn everything that you need to know to be in compliance with the HUD/EPA disclosure regulations, click here.