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The fungus among us: Toxic mold new buyer concern, seller liability

Sunday, November 25, 2001

By RAYMOND J. BOWIE, Special to the Daily News

The landmark case occurred, perhaps ominously, in a place called Dripping Springs, Texas. No one saw it coming, creeping up slowly, out of the moist, and the darkness. Within months, home sales in one major state were paralyzed, and the nation's largest state rushed emergency legislation. And now, CNN reports Erin Brockovich has made it the target of her latest crusade: toxic mold.

Coming soon to your neighborhood theater: Julia Roberts reprising her role, in "EB2: The Fungus Among Us?"

Even without the crusading Brockavich, toxic mold is poised to become the newest, perhaps most widespread, and potentially most serious environmental threat to real estate buyers, sellers, landlords and tenants.

Mold, a threat? Common, you might say, just get out the bleach, spray a little Tilex and end of threat, right? Wrong. Let's go back to Dripping Springs, Texas - and the plight of the Ballard family and their $6.5 million dream home.

It was there in 1998 that heiress Melinda Ballard, her husband and young son settled in to their 11,500-square-foot, top-of-the-line mansion, plagued afterwards only by a series of plumbing leaks their insurance company was slow to redress. Structurally, the only damage seemed to be some warping of hardwood flooring. But within months, all members of the family and their household staff began suffering headaches, dizziness, then respiratory problems, followed by hearing loss, memory lapses and possible permanent neurological damage.

Tests done by indoor air quality experts at Texas Tech found visible mold growing everywhere inside the wall and floor surfaces of the home, identified as the particularly lethal "stachybotris" black mold. The Ballard mansion had to be immediately evacuated and all its furnishings and contents abandoned. Today, signs are posted all around the exterior: "Do Not Enter - Biohazard." The house will eventually be bulldozed, but only after all the mold-infested drywall, framing and flooring is carefully cut out, wrapped up and buried at a special toxic waste disposal site. Just recently, the family won a $32 million lawsuit against their insurance company.

The Ballard case is one of only dozens of mold infestation cases wending their way through courts in states as diverse as California, Arizona, Delaware, Michigan, Ohio, New York and yes, Florida. In Texas, the huge verdict in the Ballard case has caused the nation's largest home insurers to cease writing new homeowners policies in that state, killing numerous property sales due to unavailability of insurance. In California, the legislature rushed to pass a "toxic mold protection act" mandating all property owners to make written mold disclosures to potential buyers and tenants, and ordering state agencies to establish mold limits and remediation standards.

If other state legislatures do not legislate on toxic mold, one possible outcome of the various mold lawsuits is that various courts may proceed to set legal standards for mold exposure and property owner liability. The Delaware Supreme Court held a landlord liable for $1 million for failing to repair water leaks leading to recurrent mold outbreaks causing, allegedly, tenants to suffer asthma attacks.

Florida, has been a hotbed not just for mold, but also for mold litigation. In 1997, after 15 county employees became sick from mold exposure, Martin County successfully sued the architect and builders of its courthouse for construction defects causing mold damage, recovering damages that actually exceeded the building's total construction cost.

What is clear is that the fungus is among us, toxic mold, potentially threatening the health of property users and the wealth of property owners. This is not, of course, the first environmental threat to chill the real estate marketplace in recent years. Some of these threats never gained scientific foundation and remained just passing scares. However, others like radon and lead paint became documentable health concerns and the subjects of detailed government regulation. Toxic mold may or may not follow those earlier precedents.

First, it should be noted that there are thousands of different molds and not all are toxic, and even with toxic molds some people are far more susceptible than others. Toxic molds are defined as those, like stachybotrys, that create airborne toxic spores called mycotoxins that can, upon human inhalation of sufficient quantities, cause effects ranging from breathing difficulties to lung damage to neurological/brain damage. Young children, the elderly, asthmatics and allergics are more vulnerable to mycotoxins. One study links a 300-percent increase in asthma rates over the past 20 years to toxic molds, and another attributes thereto nearly 100 percent of chronic sinus infections.

Second, many of the more serious mold reactions afflict a relatively few people with hyper-sensitivity to certain toxins, and reactions vary widely, greatly complicating the gathering of scientific documentation needed to establish quantitative public health standards for mold toxicity.

Third, toxic molds probably predated Adam and Eve in the Garden of Eden, and recent increases in toxic reactions are more attributable to factors related to building construction than to any increased prevalence or toxicity of the molds themselves. Airtight building designs, modern construction materials, and certain common construction defects have all contributed to mold becoming more of a health problem.

We all probably know two of the three elements molds need to grow: the first is dark, and the second is damp. The third element is the cellulose materials molds need to feed upon, such as wet paper products, wood, drywall, plywood, ceiling tiles, and lint or organic materials inside ductwork. If anything, the newer the construction, the greater the use has been of cellulose materials.

Add water to these cellulose building materials, let stand for even 24 hours, and common molds will already begin to grow. If no drying occurs and large areas become saturated for a prolonged period of time, toxic molds, such as the dread stachybotris, may take hold. Mold may spread rapidly in buildings where moisture becomes trapped behind artificial stucco exterior walls (EIFS) and in airtight structures where ventilation systems recirculate air contaminated with mold spores.

At that point, topical treatments like bleach may temporarily halt the growth of mold concentrations that become visible, while the mold invasion continues unabated in vast inaccessible areas that remain wet and hospitable. When mold permeates drywall or wall, flooring or roofing structural members, the only solution may be to remove the contaminated elements at staggering cost, none of which is covered by insurance.

Addressing mold problems in real estate transactions is made difficult because there are no industry or governmental standards defining what types or levels of mold are deemed excessively toxic, what remediation is acceptable, or how the remediation is to be performed and by whom. Hence, mold is unlike radon gas, lead paint and other property-related health hazards where government regulations have set action levels, mandated disclosures from property owners and defined treatment protocols. Where toxic mold is concerned, it is still: "Buyer, beware .... Seller, take care."

Certainly, under existing law in Florida, sellers of residential property would have to disclose to prospective buyers any known water leakage or intrusion, or water damage to property elements, or the presence of any toxic molds linked to health problems. But beyond that, it is left to any property owner or prospective buyer concerned about molds to take their own protective measures.

Certain red flags exist that should prompt further inquiry or testing as to the possibility of toxic molds, including musty or pungent odors, discoloration of wall, floor or ceiling surfaces, dampness, high interior humidity levels, mold on exterior surfaces or perimeter landscaping, ponding water near exterior walls, and stagnant water in air handling units or ductwork. Indoor air quality tests can be performed by certified industrial hygienists or toxicologists to measure mold spore densities in the air and identify any toxic species of mold.

Since there are no established standards for mold tests or testers, care must be taken to investigate carefully the credentials, experience and expertise of any expert hired to do air quality tests. Unfortunately, due to the recent publicity of mold litigation, shady and unqualified contractors are already being drawn to the field almost like mold is drawn to wet cellulose. For them, they see gold in that there mold.

If you are buying property and concerned about mold, most sales contracts will provide you with little or no protection when it comes to mold. Most sales contracts do give the buyer a right to have certain inspections done on the property, and further require the seller to repair or cure certain defective conditions. Mold, however, is not one of the things the buyer can standardly test for, or one of the things the seller must remedy if discovered. Hence, a buyer concerned about mold should alert his attorney to add to his contract a special clause allowing the buyer to inspect or test the property for mold and to cancel the contract if the buyer is dissatisfied with the results for any reason.

In addition, a concerned buyer can condition his contract upon the seller making written disclosure of any present or past flooding or water intrusion, any visible appearances of mold, any areas of musty odors, past water damage or discoloration, as such "red flags" can point to possible mold problems. A property owner knowing of possible mold problems can, in fact, best protect himself from liability to prospective buyers or tenants by disclosing in advance such facts or conditions as are known to him.

Current lawsuits and future legislation may in time provide more clearly defined standards for toxic mold, testing and remediation in real estate transactions. Until then, prudent buyers and sellers are left to fashion their own protective measures in the face of this growing threat both to health and wealth.

Raymond J. Bowie is a Naples area attorney admitted in Florida, Virginia and New York, who has practiced law for 21 years specializing in real estate transactions, representing buyers and sellers in closings, title insurance, tax-deferred exchanges, and mortgage financing. He is also a licensed real estate broker, mortgage broker and instructor, certified professional consultant, and past chair of the Collier County Bar Association Real Estate Section. Bowie invites real estate-related questions or suggestions for columns to be addressed to him, c/o Real Estate Editor, Naples Daily News, 1075 Central Avenue, Naples, Fla. 34102.

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