by John Adams, for the Atlanta Journal-Constitution
The new EPA “RRP rule” affects contractors, property managers and others who disturb known or presumed lead-based paint during renovation. The term renovation covers all activities done for compensation that disturb painted surfaces including most repair, remodeling and maintenance activities, such as window replacement, weatherization and demolition. The RRP rule applies to all renovation work performed in residential houses, apartments and child-occupied facilities such as schools and day-care centers built before 1978. Those affected by the RRP rule should read the complete rule, which is available on EPA’s Web site at:
Training, certification, and work practice requirements in the Renovation, Repair and Painting Rule are effective to any job in progress on April 22, 2010. Pre-renovation education requirements are effective now.
Requirements for Renovation Contractors Include:
Certification and Training Requirements
* Firms must have one or more “Certified Renovators” assigned to jobs where lead-based paint is disturbed. To become certified, a renovator must successfully complete an EPA-approved one-day training course conducted by an EPA-accredited training provider.
* All renovation workers must be trained. Renovation workers can be trained on-the-job by a Certified Renovator to use lead safe work practices, or they can become Certified Renovators themselves. Many firms will choose to hire only Certified Renovators to satisfy this requirement.
* What About Landlords Working in Their Own Property or Property Managers?
Landlords receive rental payments and maintenance personnel in rental property or child-occupied facilities receive wages or salaries derived from rent payments. This is considered compensation under the RRP rule. Therefore, renovation and repair activities performed by landlords or employees of landlords are covered by the rule. Work performed by landlords or their employees in pre-1978 housing and child-occupied facilities must be performed using lead safe work practices, if lead-based paint or presumed lead-based paint is disturbed.
Any landlord who becomes a Certified Renovator is automatically qualified to perform lead-safe repairs, renovations and turn-key jobs on his own property, and can hire non-certified workers to performs tasks under his supervision. Also, as an EPA Certified Renovator, the landlord may be able to avoid or divert liability by showing “good faith” efforts at providing lead-safe housing. In other words, it’s cheap insurance.
* I heard that this rule only applied to Investment Property. Am I missing something?
The EPA Renovate Repair Paint rule taking effect on April 22, 2010 applies to ALL pre-1978 housing in the United States, including private residences, manufactured housing and multi-family dwellings, regardless of ownership. In the original version of the law, there was an exemption for owner-occupant housing, but that exemption has been removed by EPA.
* What about Realtors, Brokers or Salespersons?
Generally, a real estate licensee need not become a Certified Renovator unless he or she want to perform covered renovations on target property. However, obtaining certification can help the licensee in several ways:
1.) Realtors who carry EPA Certified Renovator status will clearly understand when lead-safe work practices are required and when they are exempt. This will allow them to safely discuss proposed renovations or paint jobs prior to listing or making an offer on any home. About half the homes in America are considered target housing. In other words, it’s cheap insurance.
2.) A Realtor who discusses or recommends any repairs or renovations and is not an EPA Certified Renovator may have some liability for any consequences of following that professional advice. Being able to discuss the topic safely will allow the agent to do a better job for his client.
3.) A Realtor who adds the title EPA CERTIFIED RENOVATOR to their list of professional designations will be seen as committed to the safety of both clients and workers, and will be seen as more professional than an agent who is not certified.
4.) A Realtor who simply cashes a check for a contractor from a client could be interpreted to have acted as and an agent in a fiduciary capacity for an illegal transaction, and might bear liability under the EPA Toxic Substances Control Act.
5.) Particularly on pre-1978 housing, a Realtor who can knowledgeably and safely discuss steps commonly needed to make a house more attractive and saleable will get the listing every time over a competitor who is not an EPA Certified Renovator.
6.) Completing this class as offered by John Adams qualifies you for 7 hours of continuing education credit under the rules of the Georgia Real Estate Commission. No other course in Georgia offers that credit!!
* What about HVAC techs, electricians, plumbers and painters?
If they plan to conduct any work, repairs or renovations in pre-1978 housing, they MUST become EPA Certified Renovators in order to perform any work on target housing. After April 22, 2010, it is a violation of federal law to even OFFER to perform covered work on target housing.
Jobs requiring state licensure, such as contracting, plumbing, electrical or HVAC work will now have to be performed by a Certified Renovator if it is covered by the rule, which is 6 square feet for interior jobs and 20 square feet for exterior jobs on pre-1978 housing. Holding a state license does not exempt anyone from this rule.
* What about hiring a “handy man” to just clean up and paint?
Even a handy-man who only offers to paint a room in target housing is covered by the rule. That’s because typical prep work on a pre-1978 involves scraping, sanding and removal of screws on switch plates and outlet covers. These activities usually cause the job to fall inside the EPA rule on target housing.
* What’s the story on window replacement?
Any window replacement on pre-1978 housing is considered a covered repair. That’s because the friction between the window frame and the track typically generates large concentrations of fine dust, and any attempt to remove those structural elements can create a lead hazard.
* The Bottom Line
The point in all this is that this federal law is coming into effect on Thursday April 22nd, and the easy way to be in compliance is to take the one-day EPA Certified Renovator course for a five year certification. Taking the course will bring you into compliance with the law, demonstrate your commitment to lead-safe handling practices, and equip you to protect yourself, your own family, and the occupants of the homes you work in.
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:
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.
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.
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.
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.
Once the work is completed, the regulation specifies cleaning and waste disposal procedures. Clean up procedures must be supervised by a certified renovator.
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.
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:
Verification that the owner and or occupants have received the Renovate Right pamphlet or what attempts were made to provide the brochure
Documentation of the scope of work
Documentation of work practices used to complete the work
Proof of valid certification of the Certified Renovator
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.
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.
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.
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
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.
I currently own a piece of property that i would like to put in a land trust, you said NOT to record it ,How can it be record on public record,if you don’t record it with the county records?
Hello Mike, Yes, I did receive the video. Thank you. I follow what you are doing on the screen. Also (I know it probably is common sense and dumb of me to ask) but you don’t tell us what to do after in Tenant Tracking in regards to the now second payment from the tenant. So I assume that we just enter payment for the fees and bring the tenants balance to zero when the tenant makes payment. In Investor Books since we now received another payment from the tenant for the bounced check, now we also are to simply just enter another deposit. Thanks once again for your prompt attention and as always I really enjoy working with you and your system.
Thanks Mike George
george, great question (it’s great for me to get feedback as I will up the video)
My Question Mike: Hey Mike:
I’m sure you’re aware of the new "Safe Act" that requires investors like me, who finance the purchasers of properties we sell, to get a Mortgage Brokers License and a Mortgage Lenders License with all the bureaucracy that goes along with it.
Do you have a "work-around" to avoid this "all-too-intrusive" and absurd law? Note that we own our properties free and clear at the time we sell them.
Great question Ron!
Quote From The SAFE ACT.
The maximum amount of penalty for each act or omission described in paragraph (a) of this section shall be $25,000.
HUD is poised to take away our rights to offer owner or seller financing on property we own.
Under the Safe Mortgage Act proposal, you can only offer owner financing on the home you live in one time every 3 years or you must become a licensed mortgage originator.
The SAFE Act is always lurking in the background. It is an ugly law for consumers and investors. The sole intent and purpose of this law is to protect consumers from predatory lenders. There are so many proposed procedures, many of which are being handed down to each state to handle all of the details.
Your ultimate and final answer Ron will be your state’s implementation of this insane law.
Watch for an upcoming Mike’s Mondays on this very topic with my real estate investor expert attorney Harry Borders.
Here are some links if you wish to dig around yourself. I have included the hud page for the SAFE Act and some more.
While working my full time job as an undercover police detective, I had the opportunity to see a lot of things “behind closed doors.” One of the most powerful phrases most investors and Americans do NOT understand is the title of this short article. I can not tell you how many folks, after being arrested for a crime, would say “I did not know that was against the law.”
With the help of media and lenders and our economic market today, the word “real estate” has transformed into an almost bad word. In fact, many consumers are looking for ways to “get back” or get even, or sue the very folks who helped them graduate into homeownership. This means me and you have huge targets on our backs.
Be very careful in today’s real estate market. Always use the proper disclosures and always do things the right way, the professional way.
PROTECT YOURSELF NOW! Remember this powerful phrase.
Here’s some simple no-brainer tips and red flags to avoid as a real estate investor.
NEVER Buy using a Quit Claim Deed
NEVER do “kitchen table closings.”
ALWAYS use a “GOOD and REPUTABLE” real estate attorney or title company.
ALWAYS buy Title Insurance when you are buying an investment property.
If you are selling a property and you want to sell it real bad…. Be very careful about what you do to help your seller. Many times a loan officer or loan broker will ask a Seller to prepare another form or they may ask you to just sign this form and they’ll say “We Do This All The Time.” If you hear this phrase, you might want to run. (Remember, ignorance of the law is not a get out of jail free card.)
AVOID buying using a “Contract for Deed, Land Contract, or Agreement for Deed.” Once again, always have a professional full blown closing with a real estate expert attorney or title company. (It is ok for you to sell on Land Contract or Contract for Deed)
Some common schemes seen by IRS criminal investigators include:
“Property Flipping” — A buyer pays a low price for property, then resells it quickly for a much higher price. While this may be legal, when it involves false statements to a lender who is regulated by the feds, it is not. (Now do you really want to say you are a “FLIPPER” or you “FLIP” Properties… the new F word.)
Now there are new federal rules and guidelines making it a "federal crime" to flip a property owned or secured with a government loan. Yes, it is true and it took effect on April 12.
Two Sets of Settlement Statements — FOLKS, This is FRAUD!
Fraudulent Qualifications — Some “professionals” assist buyers who would not otherwise qualify by fabricating their employment history or credit record.
Happy Hunting and watch out for these Red Flags of Fraud.
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