Lead Paint Ruling to Affect California Home Values?

Mortgage & Real Estate

A housing and real estate advocacy organization is worried that a Santa Clara County Superior Court judge’s ruling in a lead paint case will cause home values to plummet throughout the Los Angeles region.

The court decision requires three major companies to pay $1.15 billion to remediate lead paint used in the interior of homes built before 1978. Overall, this affects about 2.6 million homes in Los Angeles County and approximately 5 million statewide.

The defendants—ConAgra Grocery Products, NL Industries, and Sherwin-Williams—are all expected to appeal Judge James Kleinberg’s ruling. Two other defendants, Atlantic Richfield and DuPont, were relieved of any liability.

“This could precipitate the worst plunge in California home values since the housing crash of 2007,” says Guiseppe Veneziano, president of the Los Angeles County Boards of Real Estate.

The state filed the lawsuit on behalf of 10 agencies against companies that manufactured and promoted the use of lead pigments in paint before it was banned 36 years ago. The lawsuit was filed to address public health dangers regarding children’s exposure to lead-based paint, despite efforts by these manufacturers to voluntarily remove lead from interior paints after research showed that it posed a potential health risk.

Homes built before 1978 that contain lead paint throughout the inside of the property were deemed by Kleinberg to be “public nuisances.”

The judge awarded $1.1 billion to Los Angeles, San Francisco, San Diego, Santa Clara and Monterey counties, as well as five cities. Los Angeles County respectively was given $605 million.

Kleinberg ordered $700 million of the $1.1 billion for home improvements to the poorly maintained properties. Meanwhile, the other $400 million will be used to pay for inspectors to look for evidence of lead paint in pre-1979 homes.

“Imaging the coming disruption of inspectors fanning out to ascertain traces of lead in pre-1978 structures and then requiring the removal of that lead,” Veneziano says. “This will require occupants, possibly blocks at a time, to vacate and relocate until safety is restored to the satisfaction of authorities.”

A LACBOR official who owns a home in Los Angeles County called the ruling “draconian,” as he believes this decision will have a major impact on homeowners, sellers and real estate professionals. William Rohn, executive director of LACBOR whose home was built in 1958, fears prospective buyers will avoid purchasing his property if he sells it on the open market. Additionally, Rohn thinks lenders, insurers and title companies will blackmail him because of the “public nuisance” label associated with his dwelling.

“When my home and (about 2.6 million homes in Los Angeles County are reduced in value, that will mean less income for the county assessor’s office,” Rohn says.

Similar “public nuisance” lawsuits against manufacturers of lead paint have failed in Rhode Island and other states.

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