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There's a Fungus Among Us: Mold Attacks Real Estate*
By James B. Witkin
*This article originally appeared in the June 14-20, 2002 edition of the
Washington Business Journal.
In recent months, developers, building owners, home builders and others in the real estate industry have faced an avalanche of legal claims growing out of a substance that is found almost everywhere on earth, is 100 percent organic and has been alive longer than the human race — mold.
Even Hollywood has had its share of mold claimants: Both Ed McMahon and the real-life Erin Brockovich (the paralegal whose story forms the basis for the movie) have been plaintiffs in mold cases, claiming their houses have been affected by toxic mold. McMahon even claimed that mold lead to the death of his dog, Muffin.
But what might sound like a bad joke has turned into a serious liability for the real estate and insurance industries as plaintiffs have won million-dollar judgments based on the presence of mold in single-family homes and commercial buildings.
An array of mold claims have been filed against commercial-building owners, home builders and even public authorities that own municipal buildings and courthouses.
Almost overnight, mold has joined radon, lead-based paint, asbestos and underground storage-tank leaks as sources of environmental concern for real estate professionals.
But even more than those other substances, mold has captured the public imagination — or at least the imagination of TV producers and magazine editors.
Stories about mold have appeared on many of the major TV news shows, in Time and Newsweek, and on the cover of the New York Times Magazine.
The media coverage about mold may be turning into a self-fulfilling prophecy: An article in a recent issue of Business Week speculated that fear of mold claims could affect the ability of Citicorp to sell its Travelers Insurance subsidiary.
The Good and Bad of Mold
Molds are a type of fungus. More than one thousand different species have been found in the United States.
Molds reproduce by releasing spores. When the spores land on certain materials, they may digest and destroy those materials. For mold to grow, all that is needed is moisture and a food source.
Unfortunately, for the real estate industry, many building materials serve as a good food source, and moisture is often close at hand.
Molds serve a beneficial function, breaking down leaves and generally helping plant debris to decay. Also, without molds, we would not have penicillin, or brie and camembert cheeses.
However, molds also have a less benign side. They can cause allergic reactions and asthma. Some people are more likely than others to have adverse reactions to mold, and certain types of mold are more likely than others to cause those reactions.
Some molds produce mycotoxins, toxic substances that may cause serious health effects.
One type of mold, Stachybotrys chartarum, a greenish-black substance, has received a considerable amount of negative publicity, at least in part because of an article published by the Centers for Disease Control that appeared to suggest a link between mold and serious health effects in certain infants. However, the CDC later published a follow-up article challenging the scientific basis of the original report.
Mold on Trial
The scientific jury is still out on exactly how toxic most common molds are and what levels of airborne mold spores are unhealthy.
Neither the Environmental Protection Agency, nor any other federal agency, has established any regulatory limits on mold.
Still, that has not stopped plaintiffs' attorneys from filing claims against home builders who allegedly sold moldy homes or tenants from suing landlords claiming that office spaces are affected by mold.
Recent cases include:
- Apartment occupants successfully sued their landlord, claiming the landlord's failure to maintain and repair the plumbing resulted in the growth of mold, which caused negative health effects.
- A homeowners group prevailed in a claim against the builders and contractors of their residential complex, claiming shoddy construction techniques led to water intrusion, causing mold to grow.
- In perhaps the most widely publicized mold case, a Texas jury awarded Melinda Ballard's family $32 million in her claim against her insurer, Farmers Insurance Group. Ballard argued that the insurance company failed to cover costs of fixing the problems that would lead to mold taking over her house.
In most of these cases, plaintiffs alleged some sort of construction defect that allowed excess moisture to enter their buildings. Defects such as faulty foundations, improperly flashed roofs and simple plumbing mistakes are commonly claimed.
In other cases, plaintiffs allege that contractors allowed building materials to get wet or that the building materials were defective.
Steps to take It is too early to tell whether mold will be a major environmental issue, such as asbestos, which caused the bankruptcy of several building-materials companies, or simply a passing concern, such as the concern over electromagnetic fields, which no longer affects most real estate transactions.
Still, there are steps developers, builders and building owners can take to minimize their liability:
- Make sure construction contracts are drafted so that contractors or subcontractors are held liable for any construction defects.
- Similarly, purchase and sale agreements should provide appropriate protections. Home purchasers should be educated about their obligations to prevent the buildup of moisture that could lead to mold.
- Builders should evaluate their construction techniques and choice of materials to minimize the likelihood of mold growth.
- Building mangers must pay increased attention to water leaks, drainage and similar issues. A problem that would have been treated as a simple plumbing leak 10 years ago can result in a lawsuit in today's mold-conscious environment.
© 2002 American City Business Journals Inc.
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