Lead-Based Paint Contract Change for 2019
By: Scott Peterson
Hold on to your hats, Colorado REALTORS®, a major structural shift to the lead-based paint clause is going into effect on January 1, 2019! This change will apply to the new version of the Colorado Real Estate Commission approved Contract to Buy and Sell (“CREC Contract”) and has me as happy as a dog in a sunroof!
For many years, Paragraph 10.10 of the CREC Contract has created a perilous, but often overlooked, situation for both buyers and sellers of residential real estate in Colorado. In the event the federally-mandated lead-based paint disclosure was not delivered and executed by all parties AND brokers on the transaction BEFORE the CREC Contract was fully executed, the contract was void. V.O.I.D… as in: THE CONTRACT DIDN’T EXIST!
Based on the untimely delivery and/or execution of the lead-based paint disclosure, I would speculate that 30-40 percent of real estate contracts for the sale of pre-1978 construction have been technically “void” on their face. With the evolution of electronic form contract software and the ability to identify a documents execution based not only on the “date,” but the “time of day” as well, this began to create the potential for legitimate disputes related to the contract’s formation and validity.
In an effort to mitigate exposure to lead-based paint, the disclosures have been federally mandated since 1996 and must be delivered and acknowledged prior to a buyer being obligated to perform on a residential purchase contract for homes constructed prior to 1978. Under the sweeping Environmental Protection Agency rule, the seller’s disclosure of the presence of lead-based paint is required. Moreover, real estate agents have responsibility for ensuring compliance.
Since the federal implementation of the rule, the CREC Contract has addressed the federal mandate by making the contract “void” if the lead-based paint disclosure was delivered or acknowledged after the contact was executed by the parties. Beginning January 1, 2019, this will no longer be the case.
In addition to a host of other changes to the CREC Contract, the delivery of the lead-based paint disclosure will be moving to the “Dates and Deadlines” section. Importantly, a seller will agree to deliver the lead-based paint disclosure (signed by seller and all licensees) to the buyer on or before the “Lead-Based Paint Disclosure Deadline” (hint for listing REALTORS®, this should obviously be VERY EARLY in the transaction!).
After receiving the lead-based paint disclosure from the seller, the buyer will then have until the mutually agreed “Lead-Based Paint Termination Deadline” to terminate the contract and receive the return of their Earnest Money. All REALTORS® should be aware that these are not “objection” or “resolution” deadlines. In the event a buyer takes issue with a lead-based paint disclosure OR the results of any lead-based paint inspection(s), their only recourse is to “terminate” the contract by the agreed deadline.
Colorado REALTORS® should take the time to familiarize themselves with the extensive revisions to Paragraph 10.10 of the CREC Contract as well as all of the other important changes in the new version of the form. A current version of the document (with all of the new contract changes clearly REDLINED can be found here. (Please note that this new contract MAY NOT be used prior to January 1, 2019!)
In addition to lead-based paint, there are some important changes in next year’s CREC Contract. I would encourage all Colorado REALTORS® to take the annual 4-hour Commission Update Course early in 2019 (as opposed to the week between Christmas and New Year!). Many of the important new changes will be addressed. It may also make sense to attend a specific contract course as well.
Finally, if you have questions as you are reviewing the changes prior to 2019, you can always utilize the CAR Legal Hotline at www.coloradorealtors.com/legal-help/legal-hotline/ to get clarification to your specific contract questions.