Title X: Residential Lead-Based Paint Hazard
Reduction Act of 1992
Interim Enforcement Response Policy
January 1998
Environmental Protection Agency
Office of Regulatory Enforcement
Toxic & Pesticide Enforcement Division
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THE DISCLOSURE RULE
TABLE OF CONTENTS
Page
I. Introduction and Statutory Authority 3
II. Summary of Rule and Requirements 4
III. Responsible Party/Appropriate Respondent.; 6
IV. Determining the Level of Action 7
A. Notice of Noncompliance
B. Civil Administrative Action
C. Criminal Sanctions
D. Injunctive Relief
E. Multiple Remedies
V. Assessing the Gravity of the Base Penalty 10
A. Nature
B. Circumstances
- C. Extent
Adjustment Factors 14
A. Ability to Pay/Continue in Business .
B. History of Prior Such Violations
C. Degree of Culpability
D. Other Matters as Justice May Require
(1) Attitude
(2) Supplemental Environmental Projects
(3) Voluntary Disclosure
(4) Size of Business
(5) Small Independent Owners/Lessors
(6) Gains from Noncompliance
APPENDICES:
A: Responsible Party Definitions 20
B: Civil Penalty Level Matrices 26
C: Civil Penalty Calculation Examples 31
D: ' Civil Penalty Worksheet 37
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THE POLICIES AND PROCEDURES SET FORTH HEREIN ARE INTENDED SOLELY FOR
THE GUIDANCE OF EMPLOYEES OF THE EPA. THEY ARE NOT INTENDED TO, NOR
DO THEY CONSTITUTE A RULEMAKING BY THE EPA. THEY MAY NOT BE RELIED
UPON TO CREATE A RIGHT OR A BENEFIT, SUBSTANTIVE OR PROCEDURAL
ENFORCEABLE AT UkW OR IN EQUITY, BY ANY PERSON.
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INTERIM ENFORCEMENT RESPONSE POLICY
The Disclosure Rule
I. Introduction to the Statutory and Regulatory Authority
The U.S. Congress found that low-level lead poisoning is widespread among American
children, affecting as many as three million children under the age of six. In addition, minority and
low income children are disproportionately affected. Lead poisoning in children causes
intelligence quotient deficiencies, reading and learning disabilities, impaired hearing, reduced
attention span, hyperactivity and behavior problems. The health of American children living in as
many as 4 million American homes is endangered by lead-based paint and/or lead-based paint
hazards. In response to this national crisis, Congress has enacted Title X - Residential Lead-
Based Paint Hazard Reduction Act of 1992, 42 U.S.C. 4851 ("Title X").
Section 1018, of Title X, requires the Environmental Protection Agency ("EPA") and the
Department of Housing and Urban Development ("HUD") to promulgate joint regulations for the
disclosure of lead-based paint in pre-1978 housing (target housing) which is offered for sale or
lease. EPA and HUD jointly promulgated regulations. EPA's regulations were published on
March 6, 1996, at 61 Fed. Reg. 9064, and are codified at 40 C.F.R. Part 745, Subpart F
("Disclosure Rule"). HUD's regulations are codified at 24 C.F.R. Part 35.
This Enforcement Response Policy addresses violations of the Disclosure Rule and
provides procedures to determine the appropriate enforcement response to such violations.
EPA's intent is to issue a Notice of Noncompliance ("NON") to first time violators unless
a child or a pregnant woman is put at risk of lead poisoning. The NON will put violators on
notice of their obligations and include a compliance assistance package which will provide the
information necessary to obtain compliance. An individual who disregards the NON and
continues to violate the law may be subject to a penalty.
Violations of the Disclosure Rule are subject to civil penalties under Section 16 of the
Toxic Substances Control Act ("TSCA"). Section 1018(b)(5) specifically states:
" It shall be a prohibited act under Section 409 of the Toxic Substances Control Act for
any person to fail or refuse to comply with a provision of this section or with any rule or
order issued under this section. For purposes of enforcing this section under the Toxic
Substances Control Act, the penalty for each violation applicable under Section 16 of
that Act shall not be more than $10,000. "'
1 The Civil Monetary Penalty Inflation Adjustment Rule has adjusted all of EPA's civil monetary penalties by a
ten-percent increase, thus increasing the maximum penalty for violations of the Disclosure Rule to SI 1,000 per violation
61 Fed. Reg. 69361 (1996).
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Therefore, violations of the Disclosure Rule are prohibited acts under Section 409 of
TSCA. Section 16 of TSCA, 15 U.S.C. § 2615(a), states that any person who violates a
provision of Section 409 shall be liable to the United States for a civil penalty.
II. Summary of Rule and Requirements
The Disclosure Rule requires that Sellers, Lessors and any Agent must comply with
certain requirements when selling or leasing target housing. For purposes of the Disclosure Rule,
"Seller" is defined as an entity that transfers legal title to target housing, in whole or in part, for
consideration. The Disclosure Rule defines a "Lessor" as any entity that has legal title to target
housing. "Purchaser" is defined as an entity that enters into an agreement to purchase an interest
in target housing under the Disclosure Rule. Finally, the Disclosure Rule defines "Agent" as any
party who enters into a contract with a Seller or Lessor, including any person who enters into a
contract with a representative of the Lessor or Seller, to purchase or lease target housing.
The Disclosure Rule requires that before a Purchaser or Lessee is obligated under any
contract to purchase or lease target housing, the following are some of the general requirements
which must be met:
Sellers or Lessors must disclose the presence of any known lead-based paint and/or lead-
based paint hazards to the Purchasers or Lessees and to any Agent.
Sellers or Lessors must provide Purchasers or Lessees with any available records or
reports pertaining to the presence of lead-based paint and/or lead-based paint hazards in
the target housing;
Sellers or Lessors must provide Purchasers or Lessees with an EPA-approved lead hazard
information pamphlet;
Sellers must grant Purchasers a 10-day period to conduct a risk assessment or inspection
for the presence of lead-based paint and/or lead-based paint hazards;
Sellers or Lessors must complete a Disclosure Form certifying compliance with the
Disclosure requirements;
Sellers and Lessors must retain a copy of the Disclosure Form for at least three years
from completion of the transaction; and
Each Agent involved in any transaction to lease or sell target housing must ensure
compliance with all requirements of the Disclosure Rule.
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The Disclosure Rule contains exclusions for the following transactions:
Sales of target housing at foreclosure;
Leases of target housing that have been found to be lead-based paint free by the
appropriate inspector;
Short term leases of 100 days or less;
Lease renewals where previous disclosure has occurred;
The purchase, sale or servicing of mortgages;
The sale or lease of 0-bedroom dwellings; and
Housing for the elderly or persons with disabilities (unless any child who is less
than six years of age resides or is expected to reside in such target housing)
Consultation With EPA Headquarters
In the implementation of this new enforcement program, EPA Headquarters is requiring
that EPA Regional Lead Coordinators ("Regions") consult with Headquarters on a specified
number of enforcement actions to ensure consistency and to address any unique issues.
Therefore, until Headquarters has concurred on the initial six Notices of Noncompliance and six
Civil Administrative Complaints by each Region, all enforcement documents issued must receive
prior concurrence from Headquarters. The Regions must also contact and consult with EPA
Headquarters on the use of TSCA subpoenas to enforce the Disclosure Rule, and in cases
involving egregious violations.
Enforcement Response Policy Applicability
This Disclosure Rule Enforcement Response Policy is immediately applicable and will be
used to determine the enforcement response and to calculate penalties in administrative
enforcement actions concerning violations of the Disclosure Rule.
Applicability to Federal Facilities
As discussed in Section III below, the Disclosure Rule defines "Seller" and "Lessor" to
include government agencies. Thus, when a Federal facility or government agency is the Seller or
Lessor of target housing as defined in the statute and the rule, the requirements of Section 1018
and the Disclosure Rule apply to such facility or agency.
Section 1018(b)(5) makes a violation of the Disclosure Rule a prohibited act under
Section 409 of TSCA and then subject to EPA enforcement authority under Section 16 of TSCA.
Section 408 of TSCA subjects each department, agency, and instrumentality of executive,
legislative, and judicial branches of the Federal Government to all Federal, State, interstate, and
local requirements, both substantive and procedural, respecting lead-based paint, lead-based paint
activities, and lead-based paint hazards. The Federal, State, interstate, and local substantive and
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procedural requirements referred to in Section 408 of TSCA include, but are not limited to, all
administrative orders and all civil and administrative penalties and fines regardless of whether such
penalties or fines are punitive or coercive in nature. The Disclosure Rule contains Federal
requirements respecting lead-based paint, lead-based paint activities, and lead-based paint hazards.
Therefore, Federal facilities are subject to the Disclosure Rule requirements.
EPA thus has express penalty authority over Federal facilities: In assessing penalties
against Federal agencies, EPA will apply the Disclosure Rule Enforcement Response Policy.
Before a penalty order becomes final, Section 16(a)(2) of TSCA requires the Administrator to
provide the Federal agency with notice and an opportunity for a formal hearing on the record hi
accordance with the Administrative Procedures Act. 40 Code of Federal Regulations, Part 22,
sets forth EPA's general rules of administrative practice governing the assessment of
administrative penalties. The proposed Part 22 Consolidated Rules of Practice also require that
before a final order of the Environmental Appeals Board issued to a Federal agency becomes
effective, the head of the department, agency or instrumentality of the United States to which the
order was issued can request a conference with the Administrator (40 C.F.R § 22.3 l(f)).
III. Responsible Party/Appropriate Respondent
The individuals who must comply with the Disclosure Rule are Sellers, Lessors and
Agents who are involved in the selling or leasing of target housing. The Disclosure Rule
specifically addresses the responsibilities of Agents by requiring them to ensure compliance with
the provisions of the law. Agents fulfill this requirement by informing Sellers and Lessors of their
obligations and by making sure that these activities are completed by either the Seller or Lessor or
by the Agent personally. Accordingly, the Disclosure Rule also identifies the affirmative duty of
the Sellers and Lessors to disclose to their Agents any known lead-based paint or lead-based paint
hazards in target housing.
EPA reserves the right to exercise its enforcement discretion when issuing enforcement
responses against the potentially responsible party or parties. In determining the appropriate
respondent for the enforcement response, consideration must be given to the person who has
direct control over the practices for disclosure and who should be aware of the requirement of the
Disclosure Rule.
For violations under the Disclosure Rule, any nonpenalty enforcement response should be
issued directly to the Agent of the property management firm that is responsible for the violation.
For any penalty responses, the property management firm that employs the Agent generally would
be named as the sole respondent in a Complaint. Notwithstanding the foregoing, EPA reserves
the right to issue a NON to a property management firm, and to name an Agent as the sole
respondent in a Complaint. .
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For purposes of this Enforcement Response Policy, the term "property management firm"
shall mean any entity who enters into a contract with a Seller or Lessor to act as their
representative for the purpose of selling or leasing target housing. Further discussions of the most
common scenarios for both purchase and lease transactions are provided in Appendix A of this
Enforcement Response Policy.
IV. Determining the Level of Action
Once a violation has been established with credible evidence, a determination must be
made concerning which of the following enforcement actions should be taken: Notice of
Noncompliance, Civil Penalty, Criminal Action, or some combination of these actions.
A. Notice of Noncompliance
In lieu of a civil penalty, EPA may issue a Notice of Noncompliance (NON) when, on a
case-by-case basis, EPA believes justice would be served. A NON is the recommended response
for a first- time violator of the Disclosure Rule. A compliance assistance package should be
included as an enclosure with the NON to ensure future compliance with the Disclosure Rule.
The intent of the Disclosure Rule is to help to prevent exposure to lead-based paint and/or
lead-based paint hazards by requiring disclosure and notification. There may be situations when
egregious violations of the Disclosure Rule may warrant a penalty for first-time violators. In
general, egregious violations should meet one of the following criteria:
1) the responsible party was aware of the Disclosure Rule requirements, but did not
disclose or notify the Purchaser or Lessee that the target housing contains lead-
based paint and/or lead-based hazards, and the target housing is to be occupied by
a child less than six (6) years old or a pregnant woman;
2) the responsible party was not aware of the Disclosure Rule requirements, but knew
that the target housing contains lead-based paint and/or lead-based paint hazards,
and did not disclose or notify the Purchaser or Lessee, and the target housing is to
be occupied by a child less than six (6) years old or a pregnant woman; or
3) the responsible party failed to comply with the Disclosure Rule requirements and a
person less than 18 years old or a pregnant woman who resides in the target
housing has elevated blood lead levels, and the target housing contains lead-based
paint and/or lead-based paint hazards.
The examples below do not cover all situations that may be considered egregious violations, but
provide some guidance.
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Example of an Egregious Violation for Criterion 1
A local health department became concerned about the blood lead levels of children living
in target housing after receiving tips/complaints from residents. The local health
department informed EPA that the Lessor of the target housing was aware of disclosure
requirements because the health department conducted extensive outreach to the Lessor,
but the Lessor did not comply with the Disclosure Rule when leasing the apartments. The
apartments contained lead-based paint. Several children under the age of six (6) reside hi
the target housing.
Example of an Egregious Violation for Criterion 2
/
A pregnant woman purchased target housing from a real estate agency. The real estate
agency knew that the target housing contained lead-based paint, but did not inform the
pregnant woman.
Example of an Egregious Violation for Criterion 3
A 12-year old boy lives in target housing that was rented by his parents. The Lessor did
not comply with the requirements of the Disclosure Rule when he rented the apartment to
the boy's parents. The target housing contains lead-based paint and the boy is poisoned
by lead-based .paint.
The NON will require the violator to take corrective action in order to comply with the
Disclosure Rule. Such corrective action will depend upon the specific violations. For example,
the NON may require that action should be taken by a certain date and that proof of such action
should be submitted to EPA. A property management firm that is a violator may be required to
provide a copy of firm's policy requiring Agents to ensure compliance with the Disclosure Rule.
Mitigating factors in cases where a NON has been issued shall be documented in the case file.
In the context of a property management firm, which may have employees such as
Agents, the NON generally shall be issued directly to the employee(s) responsible for the violation
with a copy of the NON should be sent to the Agent's employer. For example:
During an inspection at XYZ property management firm, six (6) real estate transactions
were reviewed and violations of the Disclosure Rule were found in each of these six
transactions. Agent A was the responsible party for two of those transactions; Agent B
was the responsible party for one transaction, and Agent C was the responsible party for
three. Each of the Agents would receive a separate NON detailing only those violations
found in their specific transaction(s). For instance, all of Agent A's violations in the two
transactions will be placed in one NON. A copy of the three NONs would be sent to the
employer of the Agents.
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B. Civil Administrative Actions
For those situations when a NON is not appropriate as an enforcement action (e.g., where
the violator has already received a NON or a violation has been determined to be egregious), a
civil penalty action is the suitable response. Violators may be subject to civil sanctions pursuant to
TSCA Section 16. On September 10, 1980, EPA published the Guidelines for Assessment of
Civil Penalties Under Section 16 of the Toxic Substances Control Act: PCS Penalty Policy. 45
Fed. Reg. 59771 (1980). This penalty system provides the general framework for civil penalty
assessments under TSCA. It establishes standardized definitions and applications of factors that
TSCA requires the Administrator to consider in proposing to assess a civil penalty. The TSCA
penalty system also states that as regulations are developed, specific penalty guidelines will be
developed adopting in detail the application of the general penalty system to the new regulation.
This Enforcement Response Policy has been developed to satisfy the TSCA penalty policy
requirements for specific penalty guidelines for the Disclosure Rule.
A Civil Administrative Penalty must be stated in a Complaint. It is recommended that only
the property management firm should be named as a Respondent and not the employee when a
Complaint is issued that involves an employee of such firm. In the case of a history of violation
where a NON has been issued previously to an Agent of a property management firm for violating
the Disclosure Rule, and the Agent leaves the firm for another firm and violates the Disclosure
Rule again, then that Agent will be named in a civil administrative complaint as the Respondent.
Before a penalty order becomes final, Section 16(a)(2) of TSCA requires the
Administrator to provide the Respondent with notice and an opportunity for a formal hearing, on
the record, in accordance with the Administrative Procedures Act. 40 Code of Federal .
Regulations, Part 22, sets forth EPA's general rules of administrative practice governing the
assessment of administrative penalties.
C. . Criminal Sanctions
A criminal violation of the Disclosure Rule under TSCA Section 16(b), 15 U.S.C. Section
2615(b) occurs for violations which are committed "knowingly or willfully." The penalty for
criminal violations of the Disclosure Rule is up to $11,000 for each violation and/or imprisonment
for up to one year. All criminal prosecutions are brought by the Department of Justice.
D. Injunctive Relief
The EPA may obtain injunctive relief by enlisting the legal support of the U.S. Department
of Justice ("DOJ"). DOJ may make an application for injunctive relief in U.S. federal district
court under TSCA Section 17 (a), to direct a violator to comply with the
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Disclosure Rule. In addition to requesting such relief, DOJ may also request on EPA's behalf that
the court use its general equity powers to compel a violator of the Disclosure Rule to abate the
lead-based paint and/or lead based-paint hazard in the target housing. A Region may take this
course of action only after consultation with EPA Headquarters.
E. Multiple Remedies
There may be unusual instances when a particular situation will present facts which require
that more than one final action should be taken. The use of multiple remedies should be done in
accordance with the procedures outlined below and only after consultation with Headquarters:
Criminal Sanctions: The law is well settled that simultaneous civil and criminal
enforcement proceedings are legally permissible. Regions may conduct parallel
proceedings. However, if it is necessary to conduct simultaneous criminal and civil
enforcement actions, such proceedings should not unfairly prejudice the defendant.
Notice of Noncompliance: In general, a NON should not be used in conjunction with any
other final remedy. Whenever a particular situation presents several violations, some of
which would merit a NON, while others would merit civil penalties, a NON may be issued
for the nonegregious violations, and an administrative penalty action should be issued for
the egregious violations.
Civil Administrative Penalty and Injunctive Relief: There may be instances in which the
concurrent use of filing a civil administrative complaint and requesting injunctive relief is
appropriate. This course of action is acceptable, provided that the facts of the case
warrant such action.
To conclude, the use of multiple remedies depends on the facts and circumstances of each
case. To preserve uniformity and fairness, the Regions are required to consult with EPA
Headquarters before using any combination of multiple remedies for a particular case.
V. Assessing the Gravity-Based Penalty
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the Guidelines for Assessment of Civil Penalties Under Section 16 of the Toxic Substances
Control Act: PCB Penalty Policy. 45 Fed. Reg. 59771 (1980), ("TSCA Civil Penalty Guidelines").
Regions are advised to consult the TSCA Penalty Guidelines because only a summary is presented
below. Under the TSCA Civil Penalty Guidelines, penalties are determined in two stages:
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1) The first stage is the determination of a "Gravity-Based Penalty" ("GBP").
Gravity refers to the overall seriousness of the violation. To determine the
gravity-based penalty, the following factors are considered:
the "nature" of the violation;
the "circumstances of the violation"; and
the "extent" of harm that may result from a given violation.
These factors are incorporated into a penalty matrix that specifies the appropriate gravity-
based penalty. Once the gravity-based penalty has been determined, upward or downward
adjustments may be made to that penalty amount.
2) The second stage involves upward or downward "adjustments" to the gravity-
based penalty. Adjustments to the penalty amount are made by considering the
following factors:
the violator's ability to pay/ability to continue in business;
history of prior violations;
degree of culpability;
such other factors as justice may require; and
voluntary disclosure.
A. Nature
The TSCA Civil Penalty Guidelines discusses the "nature" of the violation as the essential
character of the violation, and incorporates the concept of whether the violation is of a chemical
control, control-associated data gathering, or hazard assessment nature. The requirements of 40
C.F.R. Part 745, Subpart F, are most appropriately characterized as "hazard assessment" in
nature. The Disclosure Rule requirements are designed to provide potential Purchasers or
Lessees of target housing with information that will permit them to weigh and assess the risks
presented by the actual or possible presence of lead-based paint or lead-based hazards in the
target housing they might purchase or lease. The "nature" of the violation will have a direct effect
on the measure used to determine which "circumstances" and "extent" categories are selected on
the GBP matrix Appendix B.
B. Circumstances
' The "circumstances" reflect the probability of harm resulting from a particular type of
violation. For a Disclosure Rule violation, the harm is associated with the failure to disclose
information on lead-based paint or lead-based paint hazards. Therefore, the primary circumstance
to be considered is the Purchaser's or Lessee's ability to properly assess and weigh the factors
associated with human health risk when purchasing or leasing target housing. The greater the
deviation from the regulations (such as no disclosure), the greater the likelihood that the
Purchaser or Lessee will be uninformed about the hazards associated with lead-based paint.
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The following system ranks potential violations using six levels which factor in compliance
with the disclosure requirements and the level of potential harm associated with the buyer's or '
lessee's lack of knowledge of lead-based paint and lead-based paint hazards. The specific
violations of the Disclosure Rule have been characterized with levels ranging from:
Level 1 and 2 violations having a high probability of impairing the ability to assess the
information required to be disclosed. Level 1 involves egregious
violations. Level 2 involves nonegregious violations.
Level 3 and 4 violations having a medium impact of impairing the ability to assess the
information. These levels involve situations where opportunities for
evaluations or assessments were not presented.
Level 5 and 6 violations having only a low impact on the ability to assess the information
required to be disclosed. These violations result from a paperwork failure
to include certification signatures or dates in the contract.
C. Extent
"Extent" is used to consider the degree, range, or scope of the violation. In the context
of the Disclosure Rule, the measure of the "extent" of harm will focus on the overall intent of the
rule, which is to prevent childhood lead poisoning. For example, the potential for harm from the
failure to disclose known lead-based paint and lead-based paint hazard information to the
Purchaser or Lessee of target housing would be considered "major" if risk factors are high for
exposure. TSCA Civil Penalty Guidelines provides the following definitions for the three extent
categories:
Major: Potential for "serious" damage to human health or for major damage to the
environment.
i
Significant: Potential for "significant" amount of damage to human health or the
environment.
Minor: Potential for a "lesser" amount of damage to human health or the environment.
Therefore, specific violations of the Disclosure Rule requirements have been
characterized as "major," "significant," or "minor" in extent. Under the Disclosure Rule, the
extent factor is based upon three measurable facts ~
1) the age of any children who live in target housing;
2) a pregnant woman who lives in the target housing; and
3) the age of the target housing.
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1. Age of the children: Children under the age of six (6) are more likely to be affected by the
presence of lead-based paint and lead-based paint hazards. As children mature into adults,
they are less affected by the presence of lead. The age factor will be determined by the
age of the youngest child at the time the violation occurred. The extreme effects that lead
can have on children under the age of six mandates a major extent factor, regardless of the
age of the property. Children above the age of six (6), can also be adversely affected by
lead-based paint and lead-based paint hazards; therefore, the extent factor takes this fact
into consideration.
2. Pregnant women living in target housing: Pregnant women represent a special class of
individuals who are also very susceptible to the dangers of lead-based paint and lead-based
paint hazards. When a pregnant woman is poisoned by lead-based paint or lead-based
paint hazards, her unborn child may also be adversely affected.
3. Age of the target housing: The age of the target housing is important in that older
properties tend to contain paint with higher concentrations of lead (up to 50 percent by
dry weight which was used to stabilize the paint), as well as more coats of paint. In 1955
the paint industry adopted a voluntary standard, limiting the use of lead in interior paints
to no more than 1 percent lead by weight of nonvolatile solids. Data from the Bureau of
Mines indicate that approximately 97 percent of the total tonnage of lead carbonates used
in paint was used prior to 1960. Therefore, the extent factor for target housing built
before 1960 is "major."
In 1971, lead-based paint was defined as paint containing no more than 1 percent lead by
weight, which was in keeping with the voluntary reduction by the paint industry. In 1973
the Lead-Based Paint Poisoning Prevention Act was amended to lower the lead level to .5
percent by weight. Therefore, the extent factor for target housing built between 1960 and
1973 is "significant."
~'~ ~ r
In 1977, lead-based paint was defined as a paint containing no more than .06 percent lead
by weight, which is the current standard. (The current rule uses .5 percent lead by
weight). In 1978, the Consumer Product Safety Act banned the sale of lead-based paint
to consumers and the use of lead-based paint in residences and other areas where
consumers have direct access to painted surfaces. Therefore, the extent factor is "minor"
if the target housing was built between 1974 and 1978.
Violations
One Transaction
Each requirement of the Disclosure Rule is a separate and distinct requirement from the
other requirements. Therefore, the penalty for each violation of the Disclosure Rule requirement
will be assessed separately in one transaction. In addition, violations of the Disclosure Rule will
be assessed on a per transaction (individual lease or contract) basis.
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Multiple Transactions
A violator may be involved in numerous transactions in which violations of the Disclosure
Rule occurred in each transaction. For instance, a Lessor of an eight (8) unit apartment building,
which is target housing, who failed to comply with the Disclosure Rule when he rented each of
the eight apartments, will be held liable for violating the Disclosure Rule requirements in eight (8)
separate transactions. Each transaction "stands alone" and thus the penalty will be assessed as
individual counts in the Complaint. When the civil administrative Complaint is filed against the
Lessor, all eight (8) transactions will be included in the same Complaint. The .total gravity-based
penalty will be the sum of the penalties for violations of all eight (8) transactions. See Appendix C
for examples of multiple transaction penalty calculations.
Per Day Penalties
TSCA allows penalties to accrue daily. However, EPA is using its discretion to reserve
per day violations for those instances when egregious violations have occurred or there is a
continuing failure to comply. Regions should consult with EPA Headquarters for those situations
when they are considering per day penalties.
VT Adjustment Factors
Section 16(a)(2)(B) of TSCA describes the factors that EPA must also consider in
determining the amount of the civil penalty amount. With respect to the violator, these factors
.include: the ability to pay/ability to continue in business, history of prior such violations, degree of
culpability, and other factors as justice may require. Other factors as justice may require include:
(1) the size of business; (2) attitude; (3) supplemental environmental projects (SEPs); (4)
voluntary disclosure; (5) adjustment for small independent owners/lessors; and (5) economic
benefit derived from noncompliance.
A. Ability to Pav/Continue in Business
Section 16 of TSCA requires that the violator's ability to pay the proposed civil penalty be
considered as a statutory factor in determining the appropriateness of the penalty. Absent of
proof to the contrary, EPA can establish a respondent's ability to pay with circumstantial evidence
relating to a company's size and sales. The TSCA Penalty Policy states that the EPA generally
will not request penalties that are clearly beyond the financial means of the violator.
To determine the appropriateness of the proposed penally in relation to a person's ability
to pay, the case team should review Dun and Bradstreet reports, a company's filings with the
Securities and Exchange Commission (when appropriate) or other available financial reports
before issuing the complaint. In determining appropriate penalties for violators not found in the
above reports, relevant facts obtained from the sales contract or lease (such as the sale or lease
amount of the dwelling) or the number of dwellings owned or leased by the violator, may
demonstrate the violator's ability to pay the penalty.
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If a violator raises the ability to pay argument as a defense in its answer, or in the course
of settlement negotiations, EPA should request the following types of information:
The last three years of tax returns
Balance sheets
. Income statements
Statements of changes in financial position
The Statement of operations
Retained earnings statements
Loan applications, financing agreements, security agreements
Annual and quarterly reports to shareholders and the SEC, including 10K reports
Statements on assets and liabilities.
EPA reserves the option, in appropriate circumstances, to seek a penalty that might
prevent a company from continuing in business. For example, even when there is an inability to
pay, it is unlikely that EPA would reduce a penalty when a Seller, Lessor or Agent has refused to
correct a serious violation or when a Seller, Lessor or Agent has a long history of violations. This
long history would demonstrate that a less severe measure (i.e., a penalty reduction) is
ineffective.
B. History of Prior Violations
When a violator has a history of prior such violations of the Disclosure Rule, the penalty
should be adjusted upward in accordance with the TSCA penalty policy by a maximum of 25%.
The need for such an upward adjustment derives from the violator not having been sufficiently
motivated to comply by the penalty assessed for the previous violation(s).
For the purpose of this policy, EPA interprets "prior such violations" to mean prior
violations of the Disclosure Rule. The following rules apply in evaluating the history of such
violations:
(1) To constitute a prior violation, the prior violation: (1) must have resulted in a consent
agreement and final order or consent order (CAFO/CACO), consent decree, default
judgment, non-consensual civil judgment or criminal conviction; and (2) must have been
entered by or executed within five (5) calendar years prior to the issuance of the
subsequent complaint. Receipt of payment made to the U.S. Treasury can be used as
evidence constituting a prior violation, regardless of whether a respondent admits to the
violation or enters into a CAFO/CACO. Issuance of a Notice of Noncompliance does not
constitute a prior violation for purposes of this policy. A prior violation refers collectively
to all the violations which may have been described in one prior CAFO/CACO.
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(2) A corporation owned by or affiliated with the same parent corporation may not
necessarily effect each other's history (such as with independently-owned franchises), if
they are substantially independent of one another in their management, and in the
functioning of their Boards of Directors. The EPA reserves the right to request, obtain,
and review all underlying and supporting financial documents that form the basis of these
records to verify their accuracy. If the violator fails to provide the necessary information,
and the information is not readily available through other sources, then EPA is entitled to
rely on the information it does have in its control or possession.
(3) In the case of wholly-owned subsidiaries, the parent corporation's history of violation
shall apply to all of its subsidiaries. The history of violation for a wholly-owned subsidiary
will apply to the parent corporation.
C. Degree of Culpability
The two principal criteria for assessing culpability are: (a) the violator's knowledge of the
Disclosure Rule, and (b) the degree of the violator's control over the violative condition. For
penalty purposes, when the violator intentionally commits an act which he knew would be a
violation of the Disclosure Rule or would be hazardous to health, or has been issued a prior NON,
the penalty may be increased by up to 25%.
D. Other Factors as Justice Mav Require
This Enforcement Response Policy acknowledges that no two cases are exactly alike.
Unique circumstances above and beyond those taken into account by the factors discussed in the
previous sections may be significant in determining the appropriateness of a penalty.
(1) Attitude
- EPA may reduce the proposed civil penalty by a maximum amount of 30% for attitude, if
the circumstances warrant. The Attitude adjustment has three components: (1) cooperation; (2)
immediate steps taken to comply with the Disclosure Rule; and (3) early settlement.
(a) The EPA may reduce the base penalty up to 10% based on a respondent's
cooperation throughout the entire compliance, case development, and
settlement process.
(b) The EPA may also reduce the base penalty up to 10%.for a respondent's
immediate good faith efforts to comply with the Disclosure Rule and the
speed and completeness with which it comes into compliance.
(c) The EPA may reduce the base penalty up to 10% if the case is settled
before the filing of pre-hearing exchange documents.
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(2) Supplemental Environmental Projects
Supplemental Environmental Projects (SEPs) are environmentally-beneficial projects
which a respondent agrees to undertake in settlement of an environmental enforcement action, but
which the defendant is not otherwise legally required to perform. See. Interim Revised
Supplemental Environmental Projects Policy ("SEP Policy") (May 3, 1995). In return, the cost of
the SEP reduces the amount of the final penalty paid by the respondent.
EPA has broad discretion to settle cases with appropriate penalties. Evidence of a
violator's commitment and ability to perform a SEP is a relevant factor for EPA to consider in
establishing an appropriate settlement penalty. EPA must ensure that the inclusion of a SEP in
settlement of an enforcement action is consistent with the SEP Policy in effect at the time of the
settlement.
(3) Voluntary Disclosure
A Seller, Lessor, or Agent who conducts an audit and voluntarily self- discloses any
violations of the Disclosure Rule under the "Incentives for Self-Policing: Disclosure. Correction
and Prevention of Violations." 60 Fed. Reg.' 66706, December 22, 1995 ("Audit Policy") may be
eligible for a 100% reduction in the gravity-based penalty, if they meet the nine criteria established
in the Audit Policy.
If a violator self-discloses a violation of the Disclosure Rule, but not under the Audit
Policy, the proposed civil penalty amount may still be reduced for such a voluntary disclosure.
The EPA wants to encourage voluntary disclosure for Disclosure Rule violations. In order to do
this, an automatic penalty reduction may be made. To be eligible, the violator must make the
disclosure before EPA notifies him of a pending inspection, or before EPA receives information
relating to the alleged violation. Voluntary disclosure of a violation will result in a 25% reduction
of the penalty. An additional 25% penalty reduction may be given to those violators who report
the potential violation to EPA within 30 days. Under these circumstances the penalty reductions
are as follows: -
Voluntary disclosure . . 25%
Immediate disclosure within 30 days of discovery 25%
Total . . up to 50%
The reduction for voluntary disclosure and immediate disclosure may be made prior to
issuing the Civil Complaint. The Civil Complaint should state the original penalty, the reduced
penalty and the reason for the reduction pursuant to this Enforcement Response Policy.
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(4) Size of Business
Given the universe of parties covered by the Disclosure Rule, a violator may request
assistance under the EPA's Policy on Compliance Incentives for Small Business ("Small Business
Policy") (June 10, 1996). The Small Business Policy states that a business, with fewer than 100
employees, is eligible for elimination of the entire civil penalty if the violator participates in the
compliance assistance program or conducts a voluntary self-audit and meets all four criteria listed
in the Small Business Policy. The four criteria are: 1) the violator has made a good faith effort to
comply with the applicable environmental requirements; 2) the violator has violated the applicable
environmental requirement for the first time; 3) the violator has remedied the violation within a
specified time; and (4) the violation does not present a significant health or environmental threat
and does not involve criminal conduct. Regions are advised to consult the Small Business Policy
to determine whether a respondent's eligibility.
(5) Adjustment for Small Independent Owners and Lessors
Civil penalties should be adjusted downward by 50% for individuals who own one rental
property or target housing which is "for sale by owner." However, such reduction should only
apply if no Agent was involved in the transaction. This reduction is to reflect the reality that these
Sellers and Lessors are generally not engaged in the selling or leasing of property as a business.
(6) Economic Benefit of Noncompliance
A Seller, Lessor or Agent who has violated the Disclosure Rule may not profit from his
violative acts. Congress has stated that a violator should not be allowed to profit from delays in
compliance. Assessing a penalty amount that reflects a violator's economic benefit of
noncompliance serves two purposes which are vital to an effective enforcement program. First,
the penalty deters violators by taking away the economic incentive to violate the law; thus,
ensuring that violators do not reap economic benefit by failing to comply. Second, for a penalty to
be effective the fines must be as great as the economic gain in not complying or the penalty will
not give deterrent value. Consideration of economic benefit as part of the penalty maintains a
"level playing field" by ensuring that violators do not obtain an economic advantage over
competitors who made the necessary investments in environmental compliance.
The Disclosure Rule's ability to prevent harm to public health and the environment is
severely weakened whenever an economic incentive exists to violate the law. The penalty system
attempts to eliminate, or at least reduce, economic incentives by adding an estimate of economic
gains from noncompliance to the base penalty. ,
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If the EPA determines that the gravity-based penalty has not adequately captured the
economic benefit, the EPA reserves the right to seek the economic benefit from the violator and
will make that determination on a case by case basis. 2
The Disclosure Rule also allows the Purchaser or Lessee to bring a civil action for damages,.and the
court may award treble damages, court costs, reasonable attorneys fees, and expert witness fees if that party
prevails.
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APPENDIX A
Responsible Party Definitions
and
A Table of Scenarios
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Responsible Agent parties in sales transactions:
In sales situations, the Listing Agents, Selling Agents, and Buyer Agents (if paid by the
Seller or through a cooperative agreement with the listing agent) are "Agents" and are responsible
for ensuring compliance under this rule.. For the purposes of this Enforcement Response Policy,
Real Estate Agencies, Contract Service Providers and Property Management Firms are "Agents."
Listing Real Estate Agency {Listing Agent): Traditionally, the real estate agency enters
into a direct contract with the Seller or Lessor for the right (exclusive or otherwise) to represent
the Seller. The contract states the terms of compensation in the amount of a set percentage of the
sales price in consideration of the time and effort expended by the Broker (real estate agency) on
behalf of the Seller, and in further consideration of the advice and counsel provided to the Seller.
Thus, Real Estate Agencies are Agents under the Disclosure Rule, and are responsible for
ensuring compliance with the Disclosure Rule.
Since the Sales Associate and the Real Estate Agency and/or Broker are in a contractual
relationship for the purpose of selling or leasing target housing, a signature from either party is
sufficient to satisfy the Disclosure Rule.
Selling Real Estate Agency (Selling Agent): The residential real estate sales contract
traditionally is brokered between a Listing Real Estate Agency that represents the Seller, and a
Selling Real Estate Agency that represents the Purchaser. Both agencies are generally paid its
commission by the Seller. The Listing and Selling Real Estate Agencies generally have sales
associates who share their sales commission with the real estate agency. The following chart
describes the typical "splitting of fees" between the Sales Associate and the Brokers, but the
actual percentage figures may vary from situation to situation.
Commission 6% of sales price - paid 100% by Seller
Listing Sales Associate 1.5%
Listing Real Estate Agencv 1.5%
Subtotal 3.0%
Selling Sales Associate 1.5%
Selling Real Estate Agencv 1.5%
Subtotal . 3.0%
Total ' 6.0%
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Buyer's Agent: If the Selling Real Estate Agency is compensated totally by the
Purchaser, the Selling Real Estate Agency is not an Agent for the purposes of the Disclosure
Rule, and therefore, is not liable for violations of the Disclosure Rule.
Contract Service Provider: Another situation which may arise is when a Seller does not
use the services of a Real Estate Agency, but instead handles the transaction personally with the
help of a Contract Service Provider. The Contract Service Provider ensures that all the proper
documents are used, completed and signed. '
Property Management Firm: The Property Management Firm acts as an Agent for a
Lessor by entering into a contract with a Seller or Lessor for the purpose of leasing or selling
target housing. These duties generally entail showing the target housing to prospectiye
Purchasers or Lessees and ensuring that all sales and leases are properly executed by the parties.
Thus, Property Management Firms are Agents for the purposes of the Disclosure Rule.
Resident manager: In a situation when a Resident Manager performs the same duties as
described above for Property Management Firms, but the Resident Manager is an Independent
Contractor, the Resident Manager is still an Agent for the purposes of the Disclosure Rule.
Responsible Party Table:
The Responsible Party Table attempts to chart the most common scenarios for both
purchase and lease transactions. A leasing situation may involve a variety of relationships. This
Table may be revised as more examples are discovered during the course of an investigation.
EPA reserves the right to exercise its enforcement discretion when issuing enforcement responses
against any Potentially Responsible Party or Parties.
Note: Within the table, the symbol " -> " denotes "contracts with" ~ Scenario C: Owner of
Property "contracts with" Contract Service Provider who "contracts with" Employees of a
Contract Service Provider who "contracts with" Purchaser.
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RESPONSIBLE PARTY TABLE:
Parti - SELLING SITUATIONS
Parties involved in the selling
situations:
Potential Responsible Parties:
Scenario A:
Owner of Property -> Purchaser
(1) SELLER- Owner of the property
Scenario B:
Owner of Property -> Contract
Service Provider -> Purchaser
(1) SELLER- Owner of the property.
(2) AGENT- Contract Service Provider
Scenario C:
Owner of Property-> Contract
Service Provider -> Employee of
Contract Service Provider ->
Purchaser
(1) SELLER- Owner of the property
(2) AGENT- Contract Service Provider
Scenario D:
Owner of Property-> Contract
Services Provider -> Selling Real
Estate Agency -> Agent ->
Purchaser
(1) SELLER- Owner of the Property
(2) AGENT - Contract Service Provider
(3) AGENT- Selling Real Estate Agency*
* Selling Real Estate Agency compensated by the Seller
.Scenario E:
Owner of Property-> Listing and
Selling Real Estate Agencies -
>Listing and Selling Sales
Associates -> Purchaser
(1) SELLER- Owner of Property
(2) AGENT- Listing Real Estate Agency*
* Listing Real Estate Agency compensated by the Seller;
Selling Real Estate Agency compensated by the
Purchaser
Scenario F:
Owner of Property-> Listing and
Selling Real Estate Agencies -
Listing and Selling Sales
Associates -> Purchaser
(1) SELLER- Owner of Property
(2) AGENT- Listing and Selling Real Estate Agencies*
* Listing and Selling Real Estate Agency both
compensated by the Seller
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RESPONSIBLE PARTY TABLE:
Part II - LEASING SITUATIONS
Parties who are involved in the
leasing action:
Potential Responsible Parties:
Scenario A:
Owner of Property -> Lessee
(1) LESSOR- Owner of Property
Scenario B:
Owner of Property -> Property
Management Firm-> Employee of
Property Management Firm-> -
Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Property Management Firm
Scenario C:
Owner of Property-> Real Estate
Agency (who handles leasing
transaction) -> Sales Associate ->
Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Real Estate Agency
Scenario D:
Owner of Property Management
Firm-> Property Management Firm
as Owner of property-> Employee
of Property Management Firm->
Lessee
(1) LESSOR- Owner of Property Management Firm
Scenario E:
Property Management Firm as
Owner of Property-> Employee of
Property Management Firm->
Lessee
(1) LESSOR- Property Management Firm as Owner of
Property
Scenario F: -
Owner of Property -> Resident
Apartment Manager -> Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Resident Apartment Manager
Scenario G:
Owner of Property -> Contract
Service Provider -> Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Contract Service Provider
Scenario H:
Owner of Property -> Contract
Service Provider -> Employee of
Contract Service Provider ->
Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Contract Service Provider
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RESPONSIBLE PARTY TABLE:
Part II - LEASING SITUATIONS
Parties who are involved in the
leasing action;
Potential Responsible Parties:
Scenario I:
Real Estate Agency as Owner of
Property -> Sales Associate ->
Lessee
(1) LESSOR- Real Estate Agency as Owner of Property
Scenario J:
Owner of Property -> Locator
Service -> Lessee
(1) LESSOR- Owner of Property
Scenario K:
Owner of Property -> Locator
Service -> Employee of Locator
Service -> Lessee
(1) LESSOR- Owner of Property
Scenario L:
Owner of Property-> Locator
Service-> Property Management
Firm-> Employee of Property
Management Firm -> Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Property Management Firm
Scenario M:
Owner of Property -> Locator
Service -> Employees of Locator
Service -> Property Management
Firm -> Employee of Property
Management Firm -> Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Property Management Firm
Scenario N:
Owner of Property-> Locator
Service->Real Estate Agency->
Sales Associate -> Lessee
(1) LESSOR- Owner of Property
(2) AGENT- Real Estate Agency
Scenario O:
Owner of Property -> Locator
Service -> Employee of Locator
Service -> Real Estate Agency ->
Agent
(1),LESSOR- Owner of Property
(2) AGENT- Real Estate Agency
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APPENDIX B
Penalty Matrices:
Circumstances Level Matrix
Extent Category Matrix
Gravity-Based Penalty Matrix
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CIRCUMSTANCE LEVEL MATRIX
Circumstance Level
Disclosure Rule Violation
FTTS Code
Disclosure and Notification: Level 1 applies only to "Egregious" violations*
Level 1*
Seller, Lessor and Agent Requirement: Failure to provide
Purchaser or Lessee EPA-approved lead hazard
information/pamphlet as pursuant to 40 C.F.R. §
745.107(a)(l)
LSD
Level 1*
Seller, Lessor and Agent Requirement: Failure to disclose to
Purchaser or Lessee presence of any known lead-based paint
and/or lead-based paint hazards in the target housing
pursuant to 40 C.F.R. § 745.107(a)(2)
LSD
Level 1*
Seller, Lessor and Agent Requirement: Failure to disclose to
each Agent presence of any known lead-based paint and/or
lead-based paint hazards in the target housing and the
existence of any available records or reports pertaining to
lead-based paint pursuant to 40 C.F.R. § 745.107(a)(3)
LSD
Level 1*
Seller, Lessor and Agent Requirement: Failure to provide to
Purchaser or Lessee any records or reports available to the
Seller or Lessor pertaining to lead based-paint and/or lead-
based paint hazards in the target housing as cited 40 C.F.R. §
745.107.(a)(4) .
L8P
Disclosure and Notification: Level 2 applies only to "Non-Egregious" violations
Level 2
Seller, Lessor and Agent Requirement: Failure to provide
Purchaser or Lessee EPA-approved lead hazard
information/pamphlet as pursuant to 40 C.F.R. §
745.107(a)(l)
LSD
Level 2
Seller, Lessor and Agent Requirement: Failure to disclose to
Purchaser or Lessee presence of any known lead-based paint
and/or lead-based paint hazards in the target housing
pursuant to 40 C.F.R. § 745.107(a)(2)
LSD
Level 2
Seller, Lessor and Agent Requirement: Failure to disclose to
each Agent presence of any known lead-based paint and/or
lead-based paint hazards in the target housing and the
existence of any available records or reports pertaining to
lead-based paint pursuant to 40 C.F.R. § 745.107(a)(3)
LSD
Level 2
Seller, Lessor and Agent Requirement: Failure to provide to
Purchaser or Lessee any records or reports available to the
Seller or Lessor pertaining to lead based-paint and/or lead-
based paint hazards in the target housing as cited 40 C.F.R. §
745.107(a)(4)
L8P
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The following Levels below will be applied in egregious and nonegregious situations, using the
Extent Matrix to determine Major, Significant or Minor Category:
Warning Statements
Level 3
Seller and Agent Requirement: Failure to include, as an
attachment to a contract to purchase target housing, the Lead
Warning Statement as pursuant to 40 C.F.R. §745.113(a)(l)
LSI
Level 3
Seller and Agent Requirement: Failure to include, as an
attachment in the contract, a statement by the Seller
disclosing the presence of known lead-based paint and/or
lead-based paint hazards as pursuant to 40 C.F.R. § 745.113
L8I
Level 3
Lessor and Agent Requirement: Failure to include as an
attachment or within the contract, a statement by the Lessor
disclosing the presence of known lead-based paint and/or
lead-based paint hazards as pursuant to 40 C.F.R. § 745.113
LSI
Level 3
Lessor and Agent Requirement: Failure to include as an
attachment, or within the contract to lease target housing, the
Lead Warning Statement as pursuant to 40 C.F.R.
§745.113(b)(l)
LSI
Opportunity to Conduct Inspection
Level 4
Seller and Agent Requirement: Failure to permit the
Purchaser a 10-day period to conduct a reassessment or
inspection for the presence of lead-based paint and/or lead-
based paint hazards pursuant to 40 C.F.R. § 745.110(a)
L8T
Certification and Acknowledgment
Level 5
Seller and Agent Requirement: Failure to include in the
contract as an attachment a statement by the Purchaser of an
opportunity to conduct risk assessment or inspection or to
waive an opportunity to do so as pursuant to 40 C.F.R. §
745.113(a)(5)
LSI
Level 5
Seller and Agent Requirement: Failure to include in the
contract a list of any records or reports available to the Seller
that pertain to lead hazard information or the failure to
indicate that no such list exists as pursuant to 40 C.F.R. §
745.113(a)(3)
LSI
Level 5
Seller and Agent Requirement: Failure to include in the
contract a statement by the Purchaser affirming receipt of the
information required by 40 C.F.R. § 745.113(a)(2) and (a)(3)
and the lead hazard pamphlet required under 15 U.S.C.
Section 2696 as specified in 40 C.F.R. § 745.113(a)(4)
LSI
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Level 5
Seller and Agent Requirement: Failure to include in the
contract as an attachment, a statement by the one or more
Agents involved in the transaction to sell target housing that
the Agent(s) has informed the Seller of the Seller's
obligations and that the Agent(s) is aware of his duty to
ensure compliance, as pursuant to 40 C.F.R. §
745.113(a)(6)(i)and(ii)
L8I
Level 5
Lessor and Agent Requirement: Failure to include as an
attachment or within the contract, a list of any records or
reports available to the Lessor that pertain to lead hazard
information or the failure to indicate that no such list exists
as pursuant to 40 C.F.R. § 745.113(b)(3)
L8I
Level 5
Lessor and Agent Requirement: Failure to include in the
contract for lease a statement by the Lessee affirming receipt
of the information required by 40 C.F.R. § 745.113(b)(2) and
(b)(3) and the lead hazard pamphlet required under 15 U.S.C.
Section 2696 as specified in 40 C.F.R. § 745.113(b)(4)
LSI
Level 5
Lessor and Agent Requirement: Failure to include in the
contract as an attachment, a statement by the one or more
Agents involved in the transaction to lease target housing
that the Agent(s) has informed the Lessor of the Lessor's
obligations and that the Agent(s) is aware of his duty to
ensure compliance, as pursuant to 40 C.F.R. § 745.113(b)(5)
L8I
Failure to Retain Records/Signatures and Dates
Level 6
Seller and Agent Requirement: Failure to include in the
contract signatures of the Sellers, Agents and Purchasers
certifying to the accuracy of their statements, as well dates,
pursuant to 40 C.F.R. § 745.113(a)(7)
LSI
Level 6
Lessor and Agent Requirement: Failure to include in the
contract for lease signatures of the Lessor, Agent and Lessee
certifying to the accuracy of their statements, as well dates,
pursuant to 40 C.F.R. § 745.113(b)(6)
LSI
Level 6
Failure to retain a copy of the completed disclosure records
for no less than three years from the completion date of the
lease or sale pursuant to 40 C.F.R. § 745.113(6)(c)(l).
L8R
Level 1 applies only to "Egregious" violations
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Extent Category Matrix
Target housing
built before 1960
Pregnant woman
and/or children
under 6 years of age
Major
Target housing
built between 1960
and 1973
Major
Target housing built
between 1973 and
1978
Major
Pregnant woman
and/or children 6
years but under 18
years
Significant
Significant
Significant
Individuals 18 years
and older
Minor
Minor
Minor
Gravity-Based Penalty Matrix3
The GBP, a function of the nature, circumstances and extent of each violation, is determined by
using the following matrix.
CIRCUMSTANCE
HIGH
Level 1
Level 2
MEDIUM
Level 3
" Level 4
LOW
Level 5
Level 6
MAJOR
EXTENT
$11,000
S8,800
56,600
S4,400
$2,200
$1,100
SIGNIFICANT
EXTENT
$6,600
$5,500
$4,400
$2,750
$1,430
$550
MINOR
EXTENT
$2,200
$1,320
$660
$440
$220
$110
3 Matrix takes into consideration the Civil Monetary Penalty Inflation Adjustment Rule . 61 Fed. Reg.
69361 (1996).
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APPENDIX C
Civil Penalty Worksheet Examples
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CIVIL PENALTY WORKSHEET EXAMPLES
Case Scenario: Several Violations in "One" Transaction (Contract/Lease)
A Lessor owns an apartment which was built before 1960 and is occupied by a child under six (6)
years of age or a pregnant woman. The Lessor failed to comply with any of the Disclosure Rule
requirements, lead-based paint was lead present, and the Lessor was aware of the requirements
(Egregious violation).
The first Step: determine the "Circumstance" Level by referring to the Circumstance
Matrix. List each applicable violation:
Violation 1: Lessor failed to provide Purchaser or Lessee EPA-approved lead hazard Level 1
information/pamphlet
Violation 2: Lessor failed to disclose to Purchaser or Lessee presence of any known Level 1
v lead-based paint and/or lead-based paint hazards
Violation 3: Lessor failed to disclose to each agent, presence of any known lead-based Level 1
paint and/or lead-based paint hazards, and the existence of any available
records or reports pertaining to lead-based paint ,
Violation 4: Lessor failed to provide to Lessee any records or reports available pertaining Level 1
to lead based-paint and/or lead-based paint hazards in the target housing
Violation 5: Lessor failed to include as an attachment, or within the contract to lease Level 3
target housing, the Lead Warning Statement
Violation 6: Lessor failed to include as an attachment or within the contract, a Level 3
statement by the Lessor disclosing the presence of known lead-based
paint and/or lead-based paint hazards
Violation 7: Lessor failed to include as an attachment or within the contract a list of Level 5
any records or reports available to the Lessor that pertain to lead hazard
information and failed to indicate that no such list exists
Violation 8: Lessor failed to include in the contract for lease a statement by the Lessee Level 5
affirming receipt of the information
Violation 9: Lessor failed to include in the contract as an attachment, a statement by the
one or more agents involved in the transaction to lease target housing that
the agent(s) has informed the Lessor of the Lessor's obligations and that the
agent(s) is aware of his duty to ensure compliance
Violation 10: Lessor failed to include in the contract for lease signatures and dates of the Level 6
Lessors, agents and Lessee certifying to the accuracy of their statements
Violation 11: Lessee failed to retain a copy of the completed disclosure records for no Level 6
less than three years from the completion date of the lease
Level 5
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The second Step: determine the "extent" of the violation under the Extent Matrix:
Pre-1960 target housing occupied by a child under 6 years of age is considered
Major
The third step: determine the Gravity-Based Penalty ("GBP") under the Penalty matrix
for each violation:
Violation 1: Level 1, Major = $ 11,000
Violation 2: Level 1, Major = $11,000
Violations: . Level 1, Major = $11,000
Violation 4: Level 1, Major = $11,000
Violations: Level 3, Major = $ 6,600
Violation 6: Level 3, Major = $ 6,600
Violation?: Level 5, Major = $ 2,200
Violation 8: Level 5 Major = $ 2,200
Violation 9: Level 5, Major = $ 2,200 .
Violation 10: Level 6, Major = $ 1,100
Violation 11: Level 6, Major = $ 1,100
Gravity-Based Penalty: $63,800
(NOTE: These same 11 violations at the "significant" extent category (resident child 8 years
old) would have a GBP of $36,190. At the "minor" extent category (no children) for these 11
violations, the GBP would be $7,480.)
Final Step: Once the GBP has been determined, the appropriate adjustment factors need to be
applied. The following page applies the $63,800 GPB to the Adjustment Factor Worksheet
which will compute the final proposed penalty, specifically,
History of violation: 0 %
Degree of Culpability: Level II (no adjustment)
Attitude: 30% (cooperation/steps taken to comply)
Voluntary Disclosure: 0% (not voluntary)
Size of Business: , - 0
Small Independent owners/lessor: 0%
The Total Proposed Penalty is $63,800
(for the 11 violations in this one transaction at the major category egregious violation)
January 1998 -33- Interim Enforcement Response Policy
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CIVIL PENALTY ASSESSMENT WORKSHEET
Date of entry: 12/1/97
Complaint ID Number: Case Officer
Name of Respondent: XYZ Company
Date Complaint Issued:
Date Answer Received:
Date Final Order Signed:
Date Remittance Received:
i Entry Column
(1) Gravity-Based Penalty (GBP) from matrix
(2) Adjustment
factors
$
63800
Ability to pay/ Ability to continue in business %
History of prior violations
Degree of culpability
(3) Sum of items in line 2
r
%
%
%
0
0
0
0
(4) Other factors as justice may require
Attitude:
SEPs:
%
%
Voluntary ' Disclosure :
Size of business:
%
%
Adjustment for small independent owner/lessor: %
(5) Sum of items in line 4
(6) Sum of lines 3 and 5 (percentage converted
(7) Multiplication of the GBP in line 1 by total
(8) Subtraction
%
to decimal)
in line 6 $
of line 7 from linel=adjusted penalty
(9) Enter the dollar amount in line 8
$
$
(10) Enter the amount of economic benefit from noncompliance $
(11) Sum of lines 9 and 10
(12) Enter 0
(13) Sum of line 12 and line 11
$
$
equals the PROPOSED PENALTY $
30
0
0
0
0
30
0.3
19140
44660
44660
0
44660
0
44660
CIVIL PENALTY WORKSHEET EXAMPLES
January 1998
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Case Scenario 2: Several transactions with violations within each transaction
A Lessor owns an apartment which was built in 1969. No lead-base paint
hazard was present: Several transactions for apartments in that building
were inspected.
Transaction 1:
Violation 1:
Violation 2:
Violations:
Transaction 2:
Violation 1:
Lessor failed to comply with three (3) requirements under the
Disclosure Rule. All occupants of the apartment were more than 18
years of age.
Lessor failed to include as an attachment, or within the contract to lease Level 3
' target housing, the Lead Warning Statement
Lessor failed to include in the contract for lease a statement by the Lessee Level 5
affirming receipt of the information
Lessor failed to include in the contract for lease signatures and dates of the
Lessors, agents and Lessee certifying to the accuracy of their statements
Level 6
Lessor failed to comply with one (1) requirement under the Disclosure
Rule. One of the occupants of the apartment was 4 years of age.
Lessor failed to include as an attachment, or within the contract to lease Level 3
target housing, the Lead Warning Statement
Transaction 3:
Violation 1:
Violation 2:
Violation 3:
Violation 4:
Violation 5:
Lessor failed to comply with five (5) requirement under the Disclosure
Rule. One of the occupants of the apartment was 7 years of age.
Lessor failed to provide Purchaser or Lessee EPA-approved lead hazard Level 2
information/pamphlet
Lessor failed to include as an attachment or within the contract a list of
any records or reports available to the Lessor that pertain to lead hazard
information and failed to indicate that no such list exists
Level 5
Lessor failed to include in the contract for lease a statement by the Lessee Level 5
affirming receipt of the information
Lessor failed to include in the contract as an attachment, a statement by the
one or more agents involved in the transaction to lease target housing that
the agent(s) has informed the Lessor of the Lessor's obligations and that the
agent(s) is aware of his duty to ensure compliance
Lessor failed to include in the contract for lease signatures and dates of the
Lessors, agents and Lessee certifying to the accuracy of their statements
Level 5
Level 6
Determining the extent of the violations is the next step ...
January 1998
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The second Step: determine the "extent" of the violation under the Extent Matrix:
1969 target housing occupied by a child of varying ages depending on the
apartment unit. Therefore, the extent levels are different:
The third step: determine the GBP under the Penalty matrix for each violation:
1969 Apartment Building: No known lead-based paint or lead-based paint hazard:
TRANSACTION 1: (Minor extent -- occupants more than 18 years of age)
Violation 1: Level 3, Minor = $ 660
Violation 2: Level 5, Minor =$ 220
Violation 3: Level 6, Minor = $ 110
Count 1 Total Penalty = $ 990
TRANSACTION 2: (Major Extent - occupant under 6 years of age)
Violation 1: Level 3, Major = $ 6,600
Count 2- Total Penalty =$6,600
TRANSACTION 3: (Significant Extent occupant 6 years or under 18 years of age)
Violation 1: Level 2, Significant = $5,500
Violation 2: Level 5, Significant = $1,430
Violation 3 Level 5, Significant = $1,430
Violation 4: Level 5, Significant = $1,430
Violation 5 Level 6, Significant = $ 550
Count3 Total Penalty =$10,340
Gravity-Based Penalty: $17,930 (Total penalty of the 3 transactions)
(NOTE: In a sales situation, the transactions would represent the 3 files reviewed at a Real Estate
Agency.)
Final steps, apply adjustment factors ...
January 1998 -36- Interim Enforcement Response Policy
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APPENDIX D
Civil Penalty Assessment Worksheet
January 1998 - 37 - Interim Enforcement Response Policy
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CIVIL PENALTY ASSESSMENT WORKSHEET
EXPLANATION OF FACTORS
Line (1) Gravity-Based Penalty (GBP) from the Matrix
Enter a whole number in the appropriate field indicating the gravity-based penalty in a dollar
amount from the Enforcement Response Policy. The appropriate fields are marked with asterisks.
Do not push enter following the entry of a number into a field; scroll down to complete the entry.
Line (2) Adjustment Factors
Enter a whole number in the appropriate field for each item. This number indicates a percentage,
but do not enter a percentage sign (%), and do not put this entry in decimal form. The computer
will convert the whole number into a decimal. If the adjustment is a negative number then enter a
minus sign directly proceeding the number. A positive sign is not necessary, but if added directly
proceeding a number will not harm the final calculation. This number will indicate if the penalty
should be adjusted upward or downward. Example: -25 (this indicates a 25% reduction in the '
penalty).
Ability to pay/Ability to continue in businessiThis percentage adjustment will be
determined by using information regarding the dollar amount of the sale/lease and the
number of dwellings sold or leased.
History of prior violations: This entry should be limited to an upward adjustment of
25%. The adjustment is based on the violator's previous violations. Prior violations
include:
v
CAFO/CACO (a prior violation consists of all violations described in one prior
CAPO/C AGO), default judgment, consent decree
A NON is not a prior violation
A violation by the same property management firm will be considered as a prior
history. .
Degree of culpability: Based on the violator's knowledge of the particular requirement
and the degree of control over the violative condition.
The two 'principal criteria for assessing culpability are: (a) the violator's knowledge
of the Disclosure Rule, and (b) the degree of the violator's control over the
violative condition. For penalty purposes, when the violator intentionally commits
an act which he knew would be a violation of the Disclosure Rule or would be
hazardous to health, or has been issued a prior NON, the penalty may be increased
by up to 25%.
Line (3) Sum of items in line 2
Do not enter a number into the appropriate field for each item. The computer will calculate the
total of the adjustments entered for the items in line 2.
January 1998 -38- Interim Enforcement Response Policy
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Line (4) Other factors as justice may require
Enter a whole number into the appropriate field for each item. This number will indicate a
percentage adjustment in the penalty that will be allowed for these factors.
Attitude-Regions may give a percentage reduction for attitude, if circumstances
warrant. The attitude adjustment has two components: cooperation and steps
taken to comply. The EPA may reduce the based penalty up to 15% for each of
these factors for a total of 30%
Supplemental Environmental Projects (SEPs)Regions may give a percentage
reduction for the violator's involvement in environmentally beneficial projects for
settlement of an environmental enforcement action.
Voluntary Disclosure-Voluntary disclosure of a violation may result in a 25%
reduction of the gravity-based penalty. Sellers/Lessors/Agents cannot quality for
reductions in both attitude and voluntary disclosure.
Size of Business-Regions should follow the EPA's Small Business Policy and
reduce penalties accordingly, when confronted with violations that may warrant a
civil penalty.
Adjustment for small independent Sellers/Lessors-Fines should be adjusted
downward by 50% for individuals who own four or fewer rental properties and in ,
"for sale by owner" transactions.
Line (5) Sum of items in line 4
Do not enter a number into this field. The computer will calculate the total of the adjustments
enter for the items in line 4.
Line (6) Sum of lines 3 and 5 (percentage converted to decimal)
Do not enter a number into this field. The computer will calculate the total adjustments given for
factors included in lines 2 and 4, and convert these to decimal form to be used in calculating the
dollar amount of the adjustment to the penalty.
Line (7) Multiplication of the GBP in line 1 by line 6
Do not enter a number into this field. The computer will multiply the GBP in line 1 by the amount
in line 6 which is the total percentage adjustment, and this will result in the dollar adjustment for
the penalty resulting from the factors in lines 2 and 4.
Line (8) Subtraction of line 7 from line 1
Do not enter a number into this field. The dollar adjustment of the penalty will be subtracted from
the GBP in line 1 to give an adjusted, but not a final penalty.
January 1998 -39- Interim Enforcement Response Policy
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Line (9) Enter the dollar amount that is shown in Line 8
Line (10) Enter the dollar amount of economic benefit from noncompliance
Enter a whole number in this field. This number will represent a dollar amount that the violator
has gained by avoiding compliance. This is explained in the Enforcement Response Policy.
Line (11) Sum of lines 9 and 10
Do not enter a number into this field. This will increase the penalty by adding the adjusted penalty
with the amount that the violator has gained by not complying.
Line (12) For the Disclosure Rule Violations enter 0 dollar amount
Line (13) Sum of line 12 and line 11 equals the PROPOSED PENALTY:
Do not enter a number into this field. This will give you the proposed penalty for the violation.
This form can be used to recalculate the penalty as additional adjustments, such as
economic benefit or SEPs are determined. It will be important to include the date for any
changes made due to adjustments. '
January 1998 - 40 - Interim Enforcement Response Policy
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CIVIL PENALTY ASSESSMENT WORKSHEET
Date of entry:
'Complaint ID Number:
Date Complaint Issued:
Date Answer Received:
Date Final Order Signed:
Date Remittance Received:
I Entry Column
(1) Gravity-based Penalty (GBP) from matrix
(2) Adjustment
factors
$
*****
Ability to pay/ Ability to continue in business %
History of Prior Violations
Degree of Culpability
(3) Sum of items in line 2
%
%
%
*****
*****
*****
0
(4) Other factors as justice may require
Attitude:
SEPs:
%
%
Voluntary Disclosure:
Size of business:
%
%
Adjustment for small independent owner/lessor: %
(5) Sum of items in line 4
(6) Sum of lines 3 and 5 (percentage converted
(7) Multiplication of the GBP in line 1 by total
(8) Subtraction
%
to decimal)
in line 6 $
of line 7 from linel=adjusted penalty
(9) Enter the dollar amount in line. 8
$
$
(10) Enter the amount of Economic Benefit from non-compliance S
(11) Sum of lines 9 and 10
( 12) Enter 0
(13) Sum of line 12 and line 1 1
$
$
equals the PROPOSED PENALTY $
*****
*****
*****
*'* * * *
*****
0
0
0
0
*****
*****
0
*****
0
January 1998
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