November 9, 2001 - Hiding
behind walls, under carpets and inside ceilings, mold is as
old as nature. For most of history it has gone barely noticed
in the home except as an occasional, harmless discoloration
of bathroom walls and fixtures.
But during the past decade, mold has become
a threat to the building industry, thanks to the mushrooming
spread of lawsuits from tenants and homeowners who say mold
has made them sick.
One result has been higher insurance costs for builders. Another
result, real estate observers predict, will be higher rents
and home prices as landlords deal with increased expenses
for court awards, testing and treating mold.
The industry has developed a bunker mentality. "I hate
mold," said Jim Lofgren, executive director of the Rental
Housing Association of the Sacramento Valley, an apartment
landlords group. "It's a headache that should go away.
But I think we're going to have this migraine for some time."
Why it's happening now: Modern, energy-efficient construction
has unwittingly helped mold spread, said Michael Day, an executive
with Sacramento's Beutler Heating and Air Conditioning Inc.
The company installs so many heating and air conditioning
systems that Beutler is one of Sacramento's 100 largest private
companies.
Mold grows in moist environments sealed
against outside ventilation, often in concealed spots where
people can't see the crud to wipe it away. Airtight buildings
provide these conditions more readily than older, draftier
buildings do. Mold especially loves it when a leak keeps replenishing
a source of water.
Even so, modern airtight construction might not be a problem
if renters or homeowners would open their windows more often.
Office tenants have less choice, since most commercial windows
cannot be opened.
Compounding the problem, the country's building codes on ventilation
have not been adapted to the newer codes on energy conservation,
Day said. As a result, even mechanical ventilation is often
inadequate to dry out the wet spots.
The result is an airtight, watertight haven for mold colonies.
Some observers believe no modern environmental change has
done more for the spread and well-being of mold than the expansion
of human populations inside tight buildings.
Mold can be an allergen and, rarely, toxic. Because mold thrives
on cellular food like wood, most of the trouble is visited
on houses, apartments, condominiums and low-rise commercial
buildings that use wood framing. That's why so much of the
publicity about mold involves housing.
A big impact on apartments:
The mere presence of mold isn't often a problem in housing,
experts say. Cleaning it out or repairing a leak can usually
solve the problem. But when mold is discovered too late, susceptible
occupants have filed lawsuits that led to huge awards. Those
instances remain relatively rare. But they're numerous enough
to inspire insurers to back away from mold coverage, and lenders
are growing dubious.
"The mold issue is having the single greatest impact
on multifamily housing I've seen in 30 years in the business,"
said Dennis Treadaway, president of Sacramento-based FPI Management
Inc. FPI, the largest local apartment landlord, manages more
than 13,000 apartments locally and more than 22,000 nationally.
Not only are the lawsuits pushing insurance premiums through
the ceiling, he said they are making insurance increasingly
unavailable. Many landlords worry that without proper insurance,
mold litigation could force them into bankruptcy.
"There isn't a landlord I know who isn't worried,"
Treadaway said.
The insurance hikes can be financially deadly. One local landlord
recently received a mold-covering insurance premium increase
of $35 per unit per month, Lofgren said -- more than $21,000
a year on the 52-unit complex.
High quotes for repairs: Added to the insurance are the high
costs of testing and remediation when tenants find mold or
the leaks that can support mold. Testing is often needed to
appease tenants even when the mold is likely harmless.
"You've got a fear factor whenever you see mold,"
said Peter Flis, an apartment broker with Marcus & Millichap
commercial real estate brokerage. "So testing is needed
before people panic."
Tests can run from around $200 to "tens of thousands
of dollars" for larger areas, said Jeff Hicks, a principal
with Geomatrix Consultants Inc., an environmental consultant
that does mold testing.
Occasionally, he is called in to give a second opinion on
cost estimates made by remediation companies. Some remediators
have little in the way of qualifications, he said, and seem
to see the mold game as easy pickings.
"Some of the charges are amazing," he said. "Some
may charge, for instance, $100 to vacuum floors and things
like that."
He was called in to examine one estimate for more than $7,000
to fix 10 square feet of mold-covered wall by replacing the
sheetrock. "It should cost $1,000," he said. "You
see stuff like that and say, `Geez, I need to get into that
business.'
"Clients are so anxious, they often say just do it,"
Hicks said. "Everybody is panicky."
One homeowner smelled mold and called in a remediator. The
remediator found dampness in the house's crawlspace and mold
on the floor beams. He offered to fix the crawlspace, remove
the mold, and clean all of the home's furniture, clothing
and other articles for $120,000, Hicks said.
"We tested the mold," he said. "It was the
same as lumberyard mold, completely normal. There was no sign
of mold contamination in the house at all."
Among the many problems facing landlords is the lack of any
accepted standards for being a mold expert. "Anybody
can hang a shingle out saying `I do mold evaluation,' "
he said. "It's totally unregulated."
The higher insurance premiums or lack of coverage, plus the
testing and remediation, Lofgren said, are "absolutely
driving up rents."
Building dry:
Generally, the homebuilding industry tries to head off trouble
by building to prevent the leaks that contribute to standing
moisture.
"We take precautions to make sure the homes are moisture-free,"
said Steve Tofft, president of Myers Homes. "Mold needs
dampness. If you don't have dampness, you don't have a problem."
The company designs houses to be dry. During building, workers
examine lumber to make sure it is dry before it goes into
a home. Among other measures, crews monitor poured concrete
to make sure it dries, he said. Other homebuilders said much
the same: Good building practices are key. And all agreed
that rising insurance rates and insurers' elimination of mold
coverage are problems.
Resale home sellers, buyers and agents know about the risks
from mold. Mold testing before buying a house is routine,
especially when home inspectors come across leaks or signs
of mold, said Jim Day, manager of Lyon & Associates Realtors'
Sierra Oaks office. Usually, the sellers take care of the
problem before a sale. Sometimes the buyers agree to deal
with it, he said, and there have been no resulting lawsuits.
Frank Cook, head of Cook Realty, said his agents rarely run
across mold, probably because the average resale in his territory
-- around Land Park -- is older and better ventilated. Among
his clients, he said the only memorable case of mold he has
run across occurred when a working couple never opened their
windows at home.
John Cantrell, head of Security Pacific Real Estate Services,
said mold is not significant in resales in this area.
Less commotion for commercial:
Compared to apartments or houses, Greater Sacramento commercial
buildings have generally had less of a problem with mold.
But there have been exceptions.
The California Job Journal sued its landlord, Pacific Gulf
Properties, in September 2000 after employees became ill from
working in the landlord's mold-ridden office space on Tribute
Road, said Jay Verdoorn, the Job Journal's communications
director. That suit was settled and the building was gutted
and remodeled. Pacific later sold the building.
The city of Sacramento bought the old "Courtyard"
office complex on Freeport Boulevard from Buzz Oates and had
to remove mold in its basement. There was no litigation.
Commercial buildings generally benefit from the frequent use
of their doors, letting in air that dries standing moisture,
said Phil Harvey, an architect with LPA Sacramento Inc.
Oates has virtually no incidence of mold in his 17 million
square feet of warehouse, office and retail space within 50
miles of Sacramento, said Jack Spiegelman, Oates' property
manager. Spiegelman added that mold and leakage are pretty
much eliminated in the buildings because they are remodeled
when new tenants lease space.
Rob Cord, CB Richard Ellis' director of asset services, said
there's never been any notable mold issue with the 8.7 million
square feet of commercial space that his company manages locally.
"Our managers always look for seepage and mold,"
he said. "And tenants are very aware of the issue."
But the Job Journal lawsuit means that commercial buildings
are not invulnerable to mold problems. Some people are cynical
about it.
"It's going to be a huge arena of litigation," said
John Frisch, manager of Cornish & Carey/Oncor International's
Sacramento office. "There are opportunistic plaintiffs
and plenty of attorneys to accommodate them."
© Copyright 2009 The Miller Law Firm. All rights Reserved.
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