Thi article is by Barbara Nichols who is a real estate broker and general contractor in Los Angeles. She has consulted as an expert witness in hundreds of real estate lawsuits. She has recently written “The No Lawsuit Guide to Real Estate Transactions” published by McGraw Hill
Just turn on the news almost any day of the week and you will see a report of a flood somewhere with reporters walking around in hip boots. One of the worst effects of hurricane Katrina was the devastation of properties due to mold. Moisture can damage a property from many sources without a flood. A leaking roof or leaking pipes in walls, improperly installed window units or poor drainage around the property can also cause mold. Insurance companies have been swamped with claims and true to form have now all but eliminated coverage for mold damage.
Does Your Building Have Mold?
Property owners need to check their buildings for any moisture problem and act quickly to stop the moisture source, using appropriately licensed contractors. They should then call a “mold Inspection” company to check the property for any mold. How does one find a mold inspection company? The yellow pages might not be the best choice. Unfortunately, mold inspectors and mold remediators are not licensed by the state of California. Anyone can print business cards and call themselves a mold inspector or mold remediator.
How to Qualify a Mold Inspector or Mold Remediator
Mold inspectors and remediators should have “specific mold insurance,” which is Errors and Omissions Insurance. They should hold certifications in inspection and remediation from the AIAQC (American Indoor Air Quality Council), specialize in environmental inspections or remediations and belong to the numerous professional associations associated with this specialty. The inspector will check air and surface samples for mold. If mold is found the mold remediator will be given directives from the inspector where to remediate. After the remediator has removed the mold, the mold inspector returns to reinspect that the mold is now gone. Two companies are required. The mold inspector should not also be the remediator. A general contractor can now put the building back together.
Documenting the Situation
Any mold inspection and mold remediation should be thoroughly documented. A prospective tenant or buyer should be provided these document disclosures and asked to sign that they have received them. They should be encouraged to conduct their own mold inspection to assure themselves that the mold is gone. If the property owner has had a moisture problem and has repaired it but has not had a mold inspection, the problem and documentation on what was done to repair it should be given to the tenant or buyer. The tenant or buyer should then be encouraged to conduct their own mold inspection.
Some Critical Dos and Don’ts
- Do seek out the most qualified mold inspectors and remediators in your area
- Do not let the tenant, buyer, their handyman, the termite company, a general property inspector or a general contractor attempt a mold inspection or remediation.
- Do request the tenant or buyer sign a form indicating that they have declined a mold inspection if they refuse to have one against the recommendation of the owner or the owner’s representative.
- Do not paint over the mold on the ceiling and not tell the tenant or buyer. The mold will reappear within several weeks.
- Do spend the money necessary to do any remediation correctly or you will pay even more latter as the damage spreads.
How Expense is Mold Remediation?
The answer is “usually very expensive.” That is why mold lawsuits have skyrocketed. Mold develops very rapidly in moist conditions with a food source such as drywall or wood. It can cause damage amounting in some cases to total destruction of the building. For some tenants or buyers just hearing the word mold may cause them to make a hasty exit from the building. Property owners fear tenant or buyer lawsuits concerning mold. Tenants fear client lawsuits over exposure to mold when in the building, or lawsuits from their employees.
Are Health Risks Real?
Insurance companies claim that health issues raised in legal cases have exaggerated the health risks of mold. At most the insurance industry believes that the health effects of mold are allergy symptoms affecting only certain people. Consumer and health groups do not view this issue the same way. They point to devastating health effects such as pulmonary bleeding, memory loss and even brain damage. The situation is further complicated by the fact that there are no national standards establishing what levels of various types of molds are unsafe.
The Cost of Lawsuits
In one legal case, the buyer quickly discovered mold when her tenant called only one month after moving into the property and promptly moved out. The seller had painted just before listing the property for sale and painted over the mold.
The court found the seller and the seller’s agent at fault and awarded $135m to the buyer. Plaintiff legal fees added another $75-100,000 to the award. In a high rise condo building, moisture intrusion and mold from windows improperly installed and other causes resulted in a lawsuit against the builder seller by the homeowners association. I had to compute the cost of moving over a hundred families out of the building while it was being repaired, storing their belongs, finding them alternative housing for several months and moving them back in. The cost was enormous and that didn’t cover the remediation work.
Builder/Developer Lawsuits
Builder lawsuits are on the rise due to a lack of care in construction which allows moisture intrusion and the resulting development of mold. I have consulted on seven lawsuits in one development where the builder/developer lost in a class action lawsuit. Commercial natural hazard disclosures are required in California and include disclosures on flood zones. Sellers should be sure that all such required disclosures are provided to buyers, and owners to tenants.