Blondell Reynolds Brown and Her Leadhead Committee Passed the Bill – So What Now?

Below is a guest article from my good friend John Featherman, a very-much renowned realtor at Prudential Fox and Roach.  John is extremely well known for being the "Rental King in Center City" in addition to running for the Republican nomination for Mayor, losing by only a handful of votes to Ms. Karen Brown.  I would highly recommend visiting John's Facebook Page often as he is always discussing Philadelphia's current events and how they affect you.

Blondell Reynolds Brown and Her Leadhead Committee Passed the Bill - So What Now?

So let's get back to the bill, sponsored by Blondell Reynolds Brown. As a disclaimer, let me state that I am just hearing that landlords may now be given the right to self-test.

Unfortunately, the lead bill unanimously passed committee.

I attended yesterday's packed session. I would call it standing room only, but they removed anyone who was standing, ordered us to sit, and would not allow us to boo. I was asked to leave and was almost subsequently arrested, and I called the police and made a report -- that's another story.

However, as a real estate community, we must fight this before it goes to a vote with the general body.

Our side put on an amazing and compelling case. However, the votes from the committee were clearly committed before the hearing began.

Please note the following:

1. The City of Philadelphia and its properties are exempt, including the Philadelphia Housing Authority as well as "student housing." Why PHA -- which houses some of our poorest, most vulnerable population -- was exempted is not surprising, but is stunning. It's clear that Council wants to exclude the city from any burden whatsoever.

2. Landlords are discriminated against unfairly and, perhaps, illegally. This bill only requires landlords to perform the test and maintain a safe lead environment despite incontrovertible factual evidence that even the safest rental property, even one built after 1978, can become contaminated if it is next door to an owner-occupied home where lead is present and travels into an open window or door of the rental property. The committee -- in my opinion -- clearly wants to go only after landlords and is fully aware that the public will fight back if they go after all housing. I am not in favor of this bill whatsoever. However, the bill is completely useless as a strategy to combat lead poisoning if it does not include every home -- including homes build after 1978 -- since there was testimony that lead can travel into a home from another property or from the street, particularly on a warm, dry day.

3. There was no proof presented during the hearing that any of the lead cases came from the properties in question, but there was testimony that suggested that many lead cases occur when children play outdoors.

4. The proponents of the bill originally claimed that a lead exam could be obtained for $25, if purchased in bulk -- a number that I do not believe is true and is clearly not obtainable by individual landlords. The number, even with the modifications made yesterday, should still hover -- in my opinion -- around $250-$750.

5. Lead exams can only be done by independent, third party testers approved by the City of Philadelphia -- preventing apartment owners to control how quickly an appointment can be arranged. 

Here is what this will mean for our brokerage community.

A. There will be an additional and significant cost in order to lease out a home built before 1978. This cost will clearly have to be passed on to the tenant. While I have to consult with an attorney to see if there may be legal issues charging the tenant directly as an "application" or "certification fee," landlords may increase their monthly rent in order to pay for this unfunded government mandate. So we as brokers will need to recommend higher rental rates.

B. Landlords will have to do this certification every time they lease the property to a new tenant. That means if a lease falls apart in two months, it would have to be done again. The proponents of this bill said that most tenants rent for 3 years. As a Realtor that specializes in residential leasing who closed 191 rental transactions in 2010, I can tell you that number is absolutely untrue. Most of the leases we write up are one year leases, and most, in my experience, are not renewed. In this particular market, there are many "accidental landlords" -- owners who cannot sell their homes who become landlords in order to (1) financially survive until the sales market recovers; (2) qualify as an investment property so they can eventually take a capital loss which is illegal if it's a principle, owner-occupied residence. These unintentional landlords will become primary victims of this legislation.

C. The concept of a next day or next week rental will be practically eliminated if we are to follow the letter of the law. Easily half of the leases I write up start within a week of the time of the execution of the lease. Easily 10% of the leases I write up start within 1 day -- some the same day. In these cases, I often have to demand cashiers checks or cash to be deposited/wired into a landlord's account for a quick start. It is very unlikely that a landlord will be able to obtain a lead exam -- with results -- within such a short time frame. While this will especially crush larger apartment communities, the testimony yesterday said there was a shortage of testers, which would clearly result in significant delays.

D. This also means landlords who expect to turn a property in a day or two between tenants will not be able to do so -- especially during peak times in the summer when these testers are simply not available.

E. Due to extreme demand, the independent testers are likely to significantly raise their fees -- fees whose levels are not controlled by this bill. Again, this will add to the cost of doing business. And since many of our landlords are not local and we, as Realtors, need to attend with the testers -- especially if the property is occupied -- it will raise our unreimbursed costs and put us in an area of liability, as we will be performing property management duties, which we are not insured to do.

F. Our agents will have to go through training in order to understand the requirements of this bill. In particular, our agents will have to be able to determine if a property was built before 1978, which is not as easy as one thinks. Example: 10 Rittenhouse's lower facade and first few floors were built before 1978. 23 S 23rd's facade was built before 1978. So technically, any of the units -- even newer built -- could, in my non-legal opinion, be subject to this requirement.

In summary: This bill, which would require an unfunded government mandate, will drive up the cost of landlording, drive up the agent's costs, drive up the costs for the tenants, and not make anyone safer. In fact, the proposed legislation will give a false sense of security to renters that the tested environments are safe, when, in fact, on a moment's notice, dangerous lead could travel from a dangerous, untested owner-occupied home next door through an open window in a tested home.

I do have an aggressive strategy for addressing the bill before it goes to the general body and the mayor. More to come.

Please check out my original post on the lead inspection bill here.