Mortgage lenders may run into unexpected problems if properties they hold contain lead hazards, according to a real estate service company.

The federal government is set to enforce sweeping new changes in the law that sets liability in cases of lead-based paint hazards.

Kevin J. Cooke, president of Environmental Compliance Inspection Inc. Melville, N.Y., says the revised law will increase the ability of property owners and could block mortgage lenders from selling buildings known to have lead problems unless they put into action a lengthy, potentially costly clean-up procedure before the sale.

Post-Sale Liability

According to Mr. Cooke, the danger lies with lenders who hold property with unknown lead hazards and would still be liable for damages occurring after the sale of the building.

"And the banks with deep pockets are going to be the targets of these lawyers," he said. "The law says that any agent is responsible and once you take that property in foreclosure you become the owner, and liable," Mr. Cooke said.

Title X, as the law is known, will be phased in beginning in October and will require home sellers, landlords, and agents to disclose the presence of any known lead-based paint hazards before every sale or lease. The law takes into account only housing built before 1978.

As the law stands now, an owner is liable only if a person is directly and adversely affected by lead poisoning caused by the lead-based paint.

Once Title X takes full effect, in October 1995, lenders found violating the disclosure laws could be subject to a $10,000 penalty per violation, and liable for up to three times the amount of damages incurred by each individual.

The danger to lenders, Mr. Cooke said, is the ambiguity of who exactly is an "agent."

He used himself as an example.

Mr. Cooke was named in a $23 million lawsuit alleging the lead-based paint poisoning of two individuals. Because Mr. Cooke manages the property, he is considered an agent under the current law and can be held liable.

Lenders can expect a more-detailed definition of what an agent is sometime this October. But until then, Mr. Cooke said, the rule will "muck up the underwriting process."

Preventive Measures Suggested

He suggests that in order for banks to protect themselves they should take preventive measures.

"What banks should do when underwriting loan is to have the property tested by a certified company that can produce documentation that will stand up in court," Mr. Cooke said.

Testing can range from $250 to $350 per property, according to Mr. Cooke. The cost of cleaning up a site could run anywhere from $500 for a simple leadabatement case, up to $20,000 for removal of lead-based materials.

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