How do lead paint regulations impact landlords?

Many of our clients have been caught by surprise by the cost of renovating a home that was built prior to 1978. Why? Lead paint.

The EPA now requires that all contractors performing renovation, repair and painting projects (“RRP”) that disturb lead-based paint in pre-1978 homes be certified by the EPA and that they use certified renovators who are trained by EPA-approved training providers to follow lead-safe work practices.

The following activities are subject to the RRP – remodeling, paint prep, plumbing, electrical, door or window replacement and any other activity that disturbs paint in pre-1978 housing.

Alarca now requires all of its vacant homes under management built prior to 1978 to be tested for lead paint.

Why do costs increase when you have to follow RRP procedures?

• The State of North Carolina and the EPA require registration fees for firms involved in Lead Paint RRP.
• Firms and employees must attend education classes and become certified by EPA.
• Pamphlets must be distributed to owner and occupants BEFORE work starts and must be retained for 3 years by the contractor.
• Signs must be posted in work areas.
• Work areas must be contained. All objects must be removed all doors, ducts and openings in the work area must be covered with plastic. The floor surface must be covered with plastic. All personnel and equipment must be free of dust when leaving the work area.
• Specific tools, vacuums and filters must be purchased and maintained by the firm.
• Waste must be contained before leaving the containment area.
• Work must be thoroughly cleaned and verified to be free of lead dust upon completion. A HEPA vacuum must be used to vacuum all surfaces in the work area.
• Dust samples must be taken and clearance testing performed to ensure results are below applicable standards.
• Documentation of compliance upon completion must be provided to owner AND occupant and retained by firm for 3 years.

Can an owner do the work themselves or hire their own contractors? 

• In a nutshell - NO. Renovations performed by landlords or their employees must comply with the program. Only an owner-occupant may perform repairs themselves (although it is not recommended).

What are the penalties?

• EPA fines of up to $37,500 per violation per day.

Why is Alarca requiring testing?

• Many homes built before 1978 do NOT contain lead paint. We want to identify these homes to reduce costs.
• It is easier and less expensive to test a vacant home and, generally, we are more likely to encounter situations requiring RRP when we’re preparing a vacant home for a new tenant.
• If we don’t test, and a repair is required when the home is tenant-occupied, we will need to assume the home contains lead, or get it tested at that point in time. This is an inconvenience to the tenant and more costly than completing the test upfront.
• We need to know which homes contain lead so that it may be disclosed and we can flag the property to ensure that proper procedures are being followed.

When it is all said and done, we believe we are providing better service and value for our clients and residents through the application of our testing policies. In many cases the cost of the testing is more than offset by the fact that most or all of the home is discovered to be lead-free. 

• 
  

What's up with Freon prices and why does it cost so much to re-charge your A/C system??

Some of our clients have been shocked at the recent prices of re-charging their air conditioning systems. This is a direct result of a dramatic increase in the price of the most common Freon refrigerant in older air conditioning systems, known as R-22.  In some cases, prices for R-22 Freon have more than doubled this year. Since January 2003, the price has increased by more than 500%!

Why have the prices increased so much?
In January, 2010 the EPA banned the manufacture of new air conditioners using R-22 because of its ozone-depleting effects. The use of R-22 was not banned, but R-22 can only be produced or imported for the servicing of existing equipment. The reductions were designed to reduce consumption by 75%. 

By January, 2015 consumption must be reduced by 90% and by January 2020 consumption must be reduced by 99.5%. Production of R-22 will be banned in January 2020.

In January, 2012, the EPA proposed a significant reduction in the production and distribution of R-22 by as much as fifty percent, apparently to expedite the reductions. This is why pricing has increased so dramatically this year. And owners of systems containing R-22 should expect to see costs continue to rise dramatically over the next five to ten years as supplies diminish.

As R-22 is phased out, non-ozone depleting alternatives have been introduced. One of the EPA approved alternatives is R-410A which is sold under various trade names, including GENETRON, AZ-20®, SUVA 410A®, Forane 410A® and Puron®.  Another alternative is R-407C, which is allowed in retrofits of existing R-22 systems.

How does this effect the cost of recharging a system?

A typical system will hold 7-11 pounds of refrigerant. Prices of R-22 have been as high as $80-$90 per pound,  whereas a few years ago pricing was closer to $20 per pound. So on a typical unit, pricing could be as high as $900 or $1,000 just to replace the freon! Typically, however, Alarca's vendors have been providing this service in the $400-$500 range.

Replacing or retrofitting your A/C System

R410A refrigerant costs about $25 per pound. The difference in pricing versus R-22 has made it worthwhile to consider retrofitting or replacing your unit the next time it needs a significant amount of Freon.

The transition to systems using the new refrigerants required redesign of heat pump and air conditioning systems.  Systems using R-22 are NOT compatible with the R410A but are compatible with R-407C.

If your system needs replacement, you should insist in a system that uses R-410A. These systems will be more efficient and will save the cost of a retrofit down the road.

What does the 2013 Charlotte Rental Registration Ordinance mean for Property Owners?

Hopefully, this will be the last time I'm writing about this rental ordinance for awhile. If you don't feel like you need to understand all the details, but want to understand the potential impact, here's the executive summary:

1) Everyone has to register a rental property
2) There's nothing a property owner or property manager can do to GUARANTEE that your property will not make the list of properties In Need of Remedial Action (INRA)
3) The cost of making the INRA list is substantial

If you want more details, read on.

Charlotte City Council approved a new version of the Rental Registration Ordinance on May 29, 2012. Under the new ordinance every Residential Property Owner must register with the Police Department (CMPD) and provide the following:

1. The address of the property
2. The name, business address, personal address, phone number and email address of the owner.
3. The number of units on the property.
4. Proof of registration must be posted in a conspicuous place accessible at all times to the tenant.

Each quarter CMPD shall determine the Disorder Risk Threshold for each Residential Rental Property Category during the previous calendar quarter. The Disorder Risk Threshold is the Disorder Activity Count for the Property that is at the 96th percentile of properties in the Category. The Disorder Activity Count is a calculation that represents the amount of activity occurring within a specified time period in or on the property.

If a property has a Disorder Activity Count that falls above the Disorder Risk Threshold, the Owner will be notified of a Mandatory Initial Meeting. At this initial meeting the police official and the Owner will review:

1. the data that established the Disorder Activity Count
2. Any relevant evidence provided by the Owner to dispute the data.
3. Whether or not the Owner should have known that the Disorder Activity was occurring on the property.

If it is found that the property falls above the Disorder Risk Threshold, then the property will be designated In Need of Remedial Action (INRA). The Owner and police official shall develop and sign a Remedial Action Plan, the Owner will pay an administrative fee ($335 as of this writing) and the property will be set for a 3 month review date. See our blog on the Remedial Action Plan for the requirements of this plan.

As of this writing it is unclear what the penalties will be for non-compliance, although non-compliance will be considered a misdemeanor.

So what does this all mean for Rental Property Owners? In a nutshell, CMPD believes it is the Owner's responsibility to ensure that tenants behave properly and, furthermore, don't call the police when there is a problem at their home. Unfortunately, there is no way for anyone to guarantee that a property won't exceed the Disorder Risk Threshold. A property owner should understand the risks and costs of administering this program and factor this into their investment return calculations.

An experienced property manager can mitigate the risk factors and tell you which neighborhoods are likely to have properties that may fall under this program. Again, this doesn't mean that you shouldn't own homes in these neighborhoods, but you must be aware of the impact of this ordinance and its effect on your returns. Inexperienced owners and managers may decide that the impact of these programs isn't worth the risk. This may create an opportunity for experienced investors who understand the Ordinance and are proactive in working with the local police officers. Please contact Alarca Realty at info@alarca.com if you have further questions.