Housing and real estate group says Calif. judge's final decision in lead paint case will hurt home values

By Jessica M. Karmasek | Jan 13, 2014

LOS ANGELES (Legal Newsline) -- A Los Angeles County-based housing and real estate group says last week's decision against a group of former lead paint manufacturers, raising the cost of a required abatement fund by $50 million, will send California home values "in a freefall."

On Tuesday, Santa Clara Superior Court Judge James Kleinberg issued his final statement of decision. The ruling came days after the five defendants in the case -- NL Industries Inc., ConAgra Grocery Products Company, The Sherwin-Williams Company, Atlantic Richfield Company and DuPont -- filed objections to the judge's Dec. 16 proposed statement of decision.

Originally, the judge ordered NL Industries, ConAgra and Sherwin-Williams to pay $1.1 billion to replace or maintain lead paint in millions of homes in California. Atlantic Richfield and DuPont were dismissed from the lawsuit.

In his updated, 111-page final decision, Kleinberg ordered the three companies to pay out $1.15 billion.

The Los Angeles County Boards of Real Estate, which represents private property rights in Los Angeles County, argues that the ruling will send home values "in a freefall" throughout the county, and cause a "ripple effect" resulting in less money for schools, police services and other vital programs supported by property taxes.

The final ruling by Kleinberg affects about 2.6 million homes in Los Angeles County and an estimated 5 million statewide.

"This could precipitate the worst plunge in California home values since the housing crash of 2007," said Giuseppe Veneziano, president of LACBOR, adding that the ruling will have "frightening consequences."

The lawsuit was brought by Alameda County, Los Angeles County, Monterey County, San Mateo County, Santa Clara County, Solano County, Ventura County and the cities of Oakland, San Diego and San Francisco.

The federal government banned lead-based paints in the United States in 1978, but the plaintiffs argued that the paint remains in millions of homes and is the primary source of childhood lead poisoning today and that the only remedy for this public nuisance is abatement.

Kleinberg agreed, declaring pre-1978 dwellings "public nuisances" because they contain paint with lead in their interiors.

The judge 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.

Veneziano said Thursday the ruling leaves a "host of troubling questions" unanswered, including the fate of those well-maintained homes with lead paint and what actions sellers of homes affected by the ruling -- and potential home buyers -- should take.

In his decision, 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.

"Imagine 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 Rohn, LACBOR executive director and who owns a home in Los Angeles County, called the ruling "draconian."

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 it.

"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," he said Thursday.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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