The New Outrageous Lead Paint Law Has Been CANCELLED… for a while

The NEW Effective Date Is…

 

 

 The New EPA Rule for Lead Based Paint

 

The New EPA RRP Rule Requirements

The new Federal law called RRP now requires that individuals receive certain information before renovating six square feet or more of painted surfaces in a room for interior projects or more than twenty square feet of painted surfaces for exterior projects in target housing, child care facilities and schools built before 1978. The certified firm must maintain documentation describing how and when notification procedures were accomplished.

For homeowners and tenants, renovators must give both parties the pamphlet titled "Renovate Right: Important Lead Hazard Information for Families, Child Care Provider and Schools" before starting work in their living area(s). The firm must get a signature proving receipt of delivery or document the attempted method(s) and reason(s) when a signature was/could not be obtained. If mailed, the pamphlet must be sent a minimum of 7 days in advance of starting the work and a certificate of mailing is required to document it was mailed. Otherwise, you may deliver the pamphlet anytime before the renovation begins so long as the renovation begins within 60 days of the date that the pamphlet is delivered.

If the work is to be done in a common area of a tenant occupied dwelling, the certified firm must also notify tenants individually and or post signs describing the renovations including how to get a free copy of the pamphlet, the location(s) of the work, the scope of the work and the timing of the work. Any changes must also be communicated to tenants in advance and, again, must be properly documented.

For child care facilities, including preschools and kindergarten classrooms, and the families of children under the age of six that attend those facilities, a variety of considerations apply. Check out Flow Chart #2 on page 8 of the EPA’s Small Entity Compliance Guide for specific details

EPA RRP Work Practices

Once work is ready to start on a pre-1978 renovation, the Certified Renovator has a number of important and required responsibilities:

1. First, before the work starts, this person will post warning signs outside the work area and perform and/or supervise setting up containment to prevent spreading dust. The rule lists specific minimum containment procedures as well as additional performance guidelines for both interior and exterior projects.
2. Next, the Certified Renovator will supervise and or train employees to perform the required work practices they are allowed to perform if not certified themselves.
3. The rule also lists specific requirements for the handling and storage of debris, inside and outside of the work area, as well as transportation of the debris off the site.
4. The rule forbids certain work practices including open flame or torch burning, use of a heat gun that exceeds 1100°F, and high-speed sanding and grinding unless the tool is equipped with a HEPA exhaust control. Again, the Certified Renovator is responsible to ensure that these practices are not used at the jobsite.
5. Once the work is completed, the regulation specifies cleaning and waste disposal procedures. Clean up procedures must be supervised by a certified renovator.

Cleaning Verification

After the required cleanup activities have been performed, the certified renovator must verify the cleaning by matching a cleaning cloth with an EPA Cleaning Verification Card (CVC). If the cloth appears dirtier or darker than the card, the cleaning must be repeated following specific cleaning guidelines until it meets specific verification requirements.

Record Keeping

A complete file of records on the project must be kept by the Certified Firm, and certain records must be kept by the Certified Renovator if not an employee of the firm. These records must be kept for a minimum of three years. These records include, but aren’t limited to:

1. Verification that the owner and or occupants have received the Renovate Right pamphlet or what attempts were made to provide the brochure
2. Documentation of the scope of work
3. Documentation of work practices used to complete the work
4. Proof of valid certification of the Certified Renovator
5. And, Proof of worker training in the required work practices

We know that record keeping is a royal pain, and we also know that if your filing cabinet gets stolen, or is burned in a fire, or is tampered withl, you may end up in big trouble. 

Enforcement and Inspections

The RRP Rule is primarily COMPLAINT DRIVEN. That means that the agency relies on homeowners, neighbors, residents and your competitors to let the FBI know when there is an apparent violation in progress. In addition, anyone can sue for enforcement and collect legal fees, so law firms will have a real financial incentive to advertise for LEAD POISONING cases. 

The EPA will use a variety of methods to determine whether businesses are complying with the RRP Rules. Pre-notification to ERA of work activities is not required and local building departments are not required to be involved in any way, although they likely will in time. The EPA may review, at any time, a firm’s required records, maintained for all renovation jobs the firm has done, for up to three years after the job has finished. The EPA may conduct work site inspections and can issue subpoenas to ensure compliance. Violations are investigated by the FBI. This is federal law, not a local ordinance.

Penalties of up to $32,500 per violation, per day can be assessed. Those committing willful or knowing violation of the rules can also be fined an additional $32,500 per violation or risk up to 5 years imprisonment, or both. EPA may suspend, revoke, or modify a Firm’s certification. Conditions of recertification are specific depending on why the firm lost it.You don’t want to risk it.

EPA will be responding to citizen tips and complaints. Contractors should be aware that record keeping will be a major enforcement tool used by the EPA. Renovators can contest EPA’s allegations and proposed penalty before an impartial judge or jury.

Exemptions to RRP Work Practices

The required work practices may be waived under the following conditions:

• The home or child occupied facility was built after 1978.
• The property is used as 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
• The property is a zero-bedroom dwelling, such as studio apartments or dormitories.
• The renovations are performed by the home owner(s) themselves, without any paid help.
• The renovations are performed without compensation (Examples might include friends, brother-in-law, or volunteers)
• The repairs are truly minor in scope, with interior work disturbing less than six square feet of painted surfaces or exteriors disturbing less than 20 square feet of painted surfaces. The EPA has indicated that it intends for the word "disturb" to be interpreted BROADLY, rather than narrowly, so patching a nail hole would likely be considered a one square foot job.
• The homeowner MAY NOT opt out of the required work practices by signing a waiver that there are no children under age six frequently visiting the property, no one in the home is pregnant, or the property is not a child-occupied facility. Contractors should be aware that EPA has removed the owner’s right to opt-out from the rule and required work practices.
• The work practices do not apply if the entire house or specifically affected components, as described within a scope of work for the project, test lead free by a Certified Risk Assessor, Lead Inspector or Certified Renovator
• In the case that renovations are for emergency or interim control purposes, the work practices do not apply. However, in these situations, the cleaning practices and cleaning verification are still required.

Business Considerations

Compliance with this rule and protection of your business will require rethinking existing business practices. Remodelers and others considered renovators under the RRP rule will need to identify what parts of the rule they can support using existing systems, what systems will need modification, what systems will need replacement, and, finally, what new systems will be required that do not already exist. Considerations can include your sales process, contracts and specifications, estimating, production management and methods, project scheduling and critical path, and employee selection just to name a few.

New business administration activities will also need to be considered. Creation, collection and storage of required documentation will be critical for rule compliance and to manage business liabilities. Occupant notification requirements and business recertification requirements are date specific and also require documentation. Effective use of technology will be a critical factor for ensuring compliance while at the same time controlling overhead costs. Businesses with a high dependency on people, rather than technology in these areas, face additional payroll costs and risk increased liabilities due to possible human error.

Summary

The New EPA RRP rules will be a game changer for many businesses that perform work that disturbs paint. the truth is that these rules are not all that different from what we are doing right now, but we’ll all have to use a lot more 6 mil plastic sheeting and duct tape and clean up better than we ever have before.  I’m not talking broom clean, or even shop vac clean.  I’m talking about the clean you expect when you take your car or truck in for detailing.

The days of waking up in the morning and finding out what Mrs. Jones wants you to do that day are pretty much over.  From now on, pre-job planning is going to be very important. Who you hire, how you manage them, and how you will produce your work will all be very different from the world you have been living in.

You can’t pretend not to know about or wait for this to go away. Smart business owners and managers can not only meet the requirements of the RRP rule now, but can also use these new requirements in a variety of ways to separate their businesses from the competition. This is a great opportunity to get ready, or, get out. It’s also a great time and reason to invest in or replace your workforce if you plan to stay.

This article published with permission by my good friend in Atlanta, John Adams.

 

 

Mike

I have recently converted a house I bought in 1988 that was my principal residence till 2009 into a rental unit under my LLC.

How do you suggest that this conversion be recorded so that it is tax advantaged for the LLC.

Meaning, when the property gets sold at some future date the LLC does not get hit with capital gains that is non-existent.

I am thinking of cost basis of the property circa 2009, what should it be?

Since it was a principal residence up until then no depreciation was taken or reported over the 20+ years; there were some improvements done since the house was originally bought; the market value and also the assessed value have gone up and down with the market, at any rate market values are irrelevant – what then would be proper accounting for the property in the books? Would appreciate if you would enlighten me

 

Shaw Ali

 

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ANSWER:

Fantastic Question Shaw!

Long story short, for the time being and in recent years, one could sell their residence for Tax Free Profit. There were some guidelines and limits. For example, a single person was limited to 250k profit and married was limited to 500k. Many investors were using this one tax strategies to generate big chunks of tax free cash about every 2 years.

Odds are, there is a time limit on such a beautiful tax strategy. This date I am not sure of and will have to check with my CPA, and I recommend you to do the same.

As far as the LLC, there are a number of variables to factor including how you are reporting the activity of your LLC. Are you reporting it as a sole proprietorship for tax purposes?

If not, you might be able to sell your residence to your LLC and get "tax free profit" on paper and start your LLC off with a high cost basis.

Either way, please get an expert real estate investor CPA to give you a very precise laser focused to your situation answer and solution.

 

Mike Butler