Los Angeles County home values could plummet after judge's ruling that ConAgra Grocery Products, NL Industries, Sherwin-Williams must pay US$1.2M to clean up lead paint in pre-1978 houses, experts say; ruling declares such homes to be 'public nuisances'
January 9, 2014
– A judge's sweeping ruling in a residential lead-paint case threatens to send home values in a freefall throughout Los Angeles County, causing a ripple effect that will result in less money for schools, police services and other vital programs supported by property taxes, a leading housing and real estate advocacy organization warns.
The dire outlook by the Los Angeles County Boards of Real Estate®, which represents private property rights in Los Angeles County, comes in response to yesterday's ruling by a Santa Clara County Superior Court judge that three major companies pay $1.15 billion to remediate lead paint used in the interior of homes built before 1978.
The final ruling by Judge James Kleinberg, affects about 2.6 million homes in Los Angeles County and an estimated 5 million statewide.
Defendants ConAgra Grocery Products Co., NL Industries Inc. and Sherwin-Williams Co. are expected to appeal the ruling, which marked the culmination of 13 years of legal wrangling. Two other co-defendants, Atlantic Richfield Co. and DuPont Co., were relieved of any liability.
"This could precipitate the worst plunge in California home values since the housing crash of 2007," said Giuseppe Veneziano, president of LACBOR, saying the ruling will have "frightening consequences."
In declaring such pre-1978 dwellings "public nuisances" because they contain paint with lead in their interiors, Kleinberg awarded $1.1 billion to Los Angeles, San Francisco, San Diego, Santa Clara and Monterey counties, as well as five cities. The award to Los Angeles County alone is $605 million.
The state filed the lawsuit on behalf of the 10 agencies against companies that manufactured and promoted the use of lead pigments in paint before it was banned in the United States in 1978.
The lawsuit was filed to address public health dangers regarding children's exposure to lead-based paint, despite efforts by paint manufacturers dating back to the 1950s to voluntarily remove lead from interior paints following research that showed it posed a potential health risk.
Similar "public nuisance" lawsuits against manufacturers of lead paint have failed in Rhode Island and other states.
The ruling leaves unanswered a host of troubling questions, Veneziano said, including the fate of well-maintained homes with lead paint and what actions sellers of homes affected by the ruling, as well as potential home buyers, should take.
Kleinberg ordered $700 million of the $1.1 billion go toward repairs to poorly maintained properties and that $400 million be used to pay for inspectors to look for evidence of lead paint in pre-1978 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 said. "This will require occupants, possibly blocks at a time, to vacate and relocate until safety is restored to the satisfaction of authorities."
Warren J. Rohn, a LACBOR official who owns a home in Los Angeles County, called the ruling "draconian." He said the ruling will have a far-reaching impact on home owners, sellers and real estate professionals.
Rohn, whose home was built in 1958, fears buyers will shun his home if he puts it on the market and believes that lenders, insurers and title companies will blackball him because of the "public nuisance" label attached to his dwelling.
"When my home and (about 2.6 million) homes in L.A. County are reduced in value, that will mean less income for the county assessor's office," said Rohn, executive director of LACBOR.
SOURCE Los Angeles County Boards of Real Estate