Lead paint issues when cash out refi?

Question

Hey everyone! I was having lunch with another RE investor today and she mentioned issues in the past with refiing a property that contained lead paint. Has anyone had issues doing a cashout refi for a property older than 1978 that contained lead? Will I need to have lead certs before I can refi? Just curious if this is a common practice for banks...

Chad Duval · Answer

Thanks everyone! @Marcia Maynard you helped reduce my anxiety about this. I can sleep better knowing that atleast some lenders don't have issues with it.

Derreck Wells · Answer

@Marcia Maynard MA is one of the strictest states in the country in terms of lead paint. It's also a VERY tenant friendly state.

MA laws basically require every rental unit larger then a 1 bedroom to be deleaded. There's the Lead Law that says that you cannot rent to a family with a child under 7 unless you have a lead certificate on file and there's the anti-discrimination law that says that you cannot discriminate based on family status, etc.. So pretty much if it's possible for a child to live there, it's going to have to be deleaded at some point. Usually studios and one bedrooms are for singe people or childless couples, that's why I say that if it's a larger than a 1 bedroom. The one bedrooms and studios rarely have to be deleaded. However, if you end up with a single, part time parent that plans to share the bedroom with the kid, then you might have to get it done.

@Chad Duval I don't know much about mortgages, but I can see why some mortgage companies would have issues with lead paint in MA. The laws are ridiculously tenant friendly. I know a lady who lost her building to a tenant in a lead paint lawsuit. I imagine that could be problematic to a mortgage company.

Send me a colleague request and I can check the lead paint status on any properties you might be interested in buying in the state database for you.  I can let you know if they've ever been inspected or deleaded. It makes a difference if it's been inspected but not deleaded because after an inspection only a "Licensed Deleader" can work in the property until it's deleaded. I'm not talking about the EPA's RRP course that every contractor is supposed to take. A "Licensed Deleader" is different than a "Lead Safe Contractor". Sometimes a property is inspected, but never deleaded. Then when you replace the windows in the normal course of renovating, you're technically deleading and will cause problems when you need to get the unit actually deleaded. It' will get flagged as UD (Unathorized Deleading) and you won't get a lead certificate. You could jump through hoops and get a "Letter of Environmental Protection" which will allow you to rent to families, but it will devalue the property and increase insurance rates.

Andrew Kazakoff · Answer

MA is strict and the opinions outside of MA don't apply. I was speaking to a lead inspector today and he said that he and his colleagues have been told that Charlie Baker is going to relax the lead laws of MA to be more similar to other states. Although, I don't have any insight into the mortgage refi, I would just ask your mortgage guy, it's his business.

Rich Baer · Answer

@Chad Duval

In Baltimore City, lead poisoning is a terrible problem. All my Lenders require a lead safe certificate before lending. I go a step further and make all my homes lead free. I like to sleep at night.

Jeff Kehl · Answer

@Chad Duval I can't imagine a lender would care unless the paint is seriously degraded on the property in question. Even then, it's just a money question. The regulations says something like if you disturb more than 20 square feet you need an approved contractor to do the remediation. It's similar to asbestos but not that bad. They have to wrap it all in plastic and make sure none of the paint chips are left behind.

Get a quote from an approved lead-based remediation painter before you refinance so you know your downside if the paint looks bad on the property. Most larger painters will be able to do it or know who can because it's a make work/money project for them.

In my opinion this is a case of regulation gone nuts because unlike asbestos which can go airborne and cause cancer when disturbed, the lead in the paint is not a huge issue unless a lot of paint chips  are left lying around AND then ingested. There are many worse threats in the modern world but for some reason the government has decided we need protection from this one.

Marcia Maynard · Answer

All of our properties are pre-1978.  I've never had a lender, nor insurer, ask about lead-based paint. If you are concerned about this, talk with lenders and find out if it is an issue for them. Ask them what their protocol is.

If you plan to do renovation work, then be sure you understand how to work with properties that have lead-based paint. I took an EPA course to get RRP renovator certification. In one day I learned the ins and outs so I can oversee work done on our properties. I now know what to look for, how to do lead testing, how to contain lead-based paint, how to remove lead-based paint, etc. Go to the EPA website to find classes in your area:  https://cfpub.epa.gov/flpp/pub/index.cfm?do=main.t...

Some states have stricter standards and do more enforcement than others, so check out your state requirements as well.

Protect yourself, protect your workers, protect your tenants. Even after mitigating or removing lead-based paint hazards, if the building is a certain age (pre-1978), give tenants a lead-based paint hazards disclosure at the start of tenancy and the EPA booklet:"Protect Your Family From Lead In Your Home".

Also, be aware of other lead hazards that may exist, such as in old plumbing and lead in soil.

Joel Owens · Answer

The EPA enacted new rules years ago and the remediation of lead based paint. If you are disturbing more than a certain amount of surface you need an EPA certified contractor to do the work.

If you try to skip the requirements you can face very serious fines ( tens of thousands ) and also claims by tenants.

Lead paint issues when cash out refi?

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