Mold Can be a Sticky Problem for Tenants, Owners Alike

As published in Nashville Business Journal.

Mold is pervasive. The vast majority of molds are either beneficial (think of cheese and penicillin), or at least non-toxic. However, toxic molds do exist, and many non-toxic strains may cause allergic reactions in some people.

One type of greenish-black mold, known as Stachybotrys chartarum, has recently become a cause celebre because the EPA has said it's "known to produce potent toxins under certain circumstances." Extensive litigation has arisen regarding the presence of this type of mold, particularly in Texas, even though no firm scientific evidence exists regarding its effect on healthy adults. Mold-related insurance claims will escalate as mold growth in flooded buildings becomes a common issue in the wake of hurricanes Katrina and Rita.

Insurance companies are caught in a pinch with mold. No scientific consensus exists on what the mold problem is, or how to deal with it. No generally accepted standards have been promulgated for mold remediation, and no state or federal agencies currently offer mold testing services. No licensing standards exist for mold remediation contractors, and the quality of service varies. Further, the purported health effects remain difficult to assess.

Because insurance companies cannot accurately assess their exposure, they want to limit it. New policies have specific exclusions for mold. For older policies that do not contain an express exclusion for mold, insurance carriers use every defense imaginable to deny coverage.

What should property owners do? Ideally, they should prevent mold from becoming a problem in the first place. Mold grows in damp areas. Owners should inspect their buildings to find areas conducive to mold and eliminate them. Landlords should require tenants to report any evidence of suspected mold, including not only visible mold growth, but also smell and dampness, as well as water damage.

Further, if possible, owners who lease their property or are in the process of selling it should allocate liability for mold in the lease or contract. For example, a lease should state that the landlord is not liable for mold related injuries unless the landlord fails to undertake remediation within 30 days after obtaining notice from the tenant of the mold condition.

Conversely, the tenant should be liable to the landlord for any damages arising from the tenant's failure to report water damage, flooding or observable mold. In a contract, the seller can sell the property "as is" and specifically disclaim any liability for mold.

What if an owner discovers or receives notice of mold? The first rule is not to panic. Most molds are non-toxic. Even for toxic mold, no legal requirement for remediation exists. But, as a practical matter the owner must correct the problem to protect the property value and to avoid illness and potential liability. The EPA provides guidance in its report, "Mold Remediation in Schools and Commercial Buildings," which can be found on the EPA's Web site (www.epa.gov iaq/molds/index.html).

Merely removing mold and materials affected by mold will not solve the problem. The owner also needs to determine the source of the dampness causing the mold, otherwise the mold will recur.

In general, for owner-occupied properties remediating the mold and its source dampness will be sufficient. If there's a potential for mold-related litigation, the owner may need to find a reputable and qualified inspector to determine whether the mold is one of the toxic varieties.

This is harder than it looks - there are not many qualified inspectors, and the whole area of mold detection and remediation is rife with fraud. The owner should look for a "certified industrial hygienist" (CIH) for the inspection. A CIH is certified by the American Board of Industrial Hygienists and is specially trained to conduct mold inspections.

The issue of mold currently has no easy answers. The bottom line is that where an owner suspects a mold problem, it should hire the most competent and qualified professionals available, from the inspector, to the contractor performing remediation, to an attorney experienced in this area to look for all potential avenues of collection.