Precedent-setting court ruling on mold benefits apartment firms.

Setting an important precedent for apartment firms facing mold-related lawsuits, the U.S. District Court in Atlanta has partially granted a property, owner's motion for summary judgment in a case where a resident is claiming that mold in her apartment seriously damaged her health. (Diagnostic Strategies Inc. and Mevie White v. Worthing Cameron Crest, L.P., and FWC AA GP, LLC, 677'il Action No. 103-CV-1920-JOF, (N.D.Ga., July 26, 2005).)

Following a minor incident of water intrusion in the apartment where there was no visible mold growth, the community's management offered to relocate the resident to another apartment or another community. The resident refused the offer and left the community, leaving her belongings in the unit. Her lawsuit sought $1.5 million to compensate for damage to her belongings and serious health injuries, including chronic fatigue, decreased cognitive functions and loss of short-term memory. NAA/NMHC joined the Atlanta and Georgia Apartment Associations in filing a friend-of-the-court brief presenting current scientific research on the health effects of mold, relying primarily upon the "Damp Indoor Spaces and Health" report issued by the National Academy of Sciences in 2004 and articles in peer-reviewed scientific literature published by the American Society for Microbiology.

On July 26, the court ruled in favor of the apartment owner, finding that the plaintiff's medical experts did not meet the accepted standard of scientific rigor in establishing a causal relationship between conditions in the apartment and the plaintiff's alleged health issues. While leaving open the issue of the plaintiff's claim for possible contamination of her personal belongings and furniture for later trial, the court noted that the plaintiff may have a hard time avoiding a contributory negligence defense under Georgia law since she abandoned her personal property and refused to move it even after the lease term had expired. This ruling is a significant victory for the apartment industry as it establishes a carefully developed line of reasoning with respect to expert testimony in the matter of causation.

Towing Provision in Highway Bill Could Have Adverse Effects

Responding to complaints about overly aggressive automobile towing, Congress included a provision in the newly enacted highway bill (H.R. 3) that allows states to enact certain restrictions on towing and orders a federal study of predatory towing practices. The measure, which could impact apartment firms that have contracts with towing companies, allows states to require property owners to: (1) authorize each tow in writing; and (2) be present at each tow. If enacted by a state, the new law could require apartment properties to have a person on call 24/7 to be present for towing activity.

At least one state, California, already has such a law on the books. The California measure, which requires both written authorization for each tow and the presence of the property owner, was largely invalidated by a federal appeals court in 2000. The new highway bill's towing provisions effectively reverse that ruling and allow the state to begin enforcing their existing law again.

While NAA/NMHC support efforts to rein in abusive towing practices, NAA/NMHC and a coalition of real estate groups opposed the provision. NAA/NMHC believe it does little to address those problems and instead will create serious problems for apartment communities and others who must enforce parking rules so residents and employees are not denied the full use of their parking privileges. The towing industry and NAA/NMHC's real estate coalition will continue to seek a remedy for this onerous language once Congress returns in September. Members are advised to check their state law to see if it contains any restrictions relative to contract towing practices, and, if not, to monitor any future state efforts to enact such laws.

Fair Housing, ADA Compliance Are Top Priorities For HUD 

Apartment firms should be alerted that accessibility advocates and the federal government have made enforcement of fair housing protections for the handicapped and the Americans with Disabilities Act (ADA) a top priority. In recent years, litigation has focused on the Fair Housing Act's (FHA) accessibility design requirements, but attention is now turning to the other FHA requirements concerning handicapped renters. These requirements apply to all properties, regardless of when they were built, and they prohibit discrimination against the handicapped; require housing providers to make reasonable accommodations in roles and practices; and allow reasonable modifications to apartment units.

Violating these laws can cost firms millions in fines and retrofitting costs. HUD published a manual, titled "Testing Guidance for Practitioners," for advocacy groups who conduct testing. This tool can help apartment firms understand the methods that will be used to test their properties for non-compliance. It is available at www.huduser.org/Publications/pdf/DDS_Testing_Guidance.pdf.

Energy Bill includes Apartment Tax Incentives

The energy bill signed into law on Aug. 8 contains several provisions that will benefit apartment firms. The $14.6 billion National Energy Policy Act of 2005 (H.R. 6) concludes an intense, four-year effort to pass comprehensive legislation to address the nation's energy needs. Among the winning elements for the real estate industry is a temporary tax credit to spur construction of energy-efficient commercial spaces (including high-rise apartments). Specifically, properties that exceed by 50 percent the efficiency standards set out in American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 90.1 can take a $1.80 per square foot tax credit the year the property is placed into service.

The bill also allows firms that improve the energy efficiency of their building systems (i.e., lighting, HVAC, hot water systems and building envelope) to deduct 60 cents per square foot for each system improved up to the $1.80 limit. It also gives firms that purchase qualified photovoltaic and solar water heating equipment (used exclusively for purposes other than heating swimming pools and hot tubs), as well as qualified fuel cell power plants, a credit equal to 30 percent of the cost. All of the credits mentioned apply to properties placed in service -after Dec. 31, 2005, and before Jan. 1, 2008. Finally, appliance manufacturers get tax incentives to produce and market energy-efficient appliances.

GSE Reform Legislation Moves Forward in Senate

Congress is moving closer to establishing a new regulator for Fannie Mae and Freddie Mac. On July 28, the Senate Banking, Housing and Urban Affairs Committee passed its version of the Government Sponsored Enterprises (GSE) legislation (S. 190). The measure closely tracks legislation passed by the House Financial Services Committee in May (H.R. 1461) with two important exceptions.

First, the Senate bill places limits on what the GSEs can retain in their portfolios, while the House bill leaves those decisions to the new regulator, lit a move opposed by NAA/NMHC, the Senate bill places severe restrictions on multifamily mortgages eligible to be held in the GSE's portfolios, lit the view of NAA/NMHC, this would be overwhelmingly damaging to the apartment industry and could lead to higher-cost loans, less flexible loan terms and a reduction in their conventional lending. NAA/NMHC are also concerned that the Senate language would limit investments in multifamily mortgage revenue bonds and low-income housing tax credits.

The Senate bill also eliminates a provision from the House measure that would require the GSEs to contribute 5 percent of their after-tax profits to a low-income housing fund. Despite this recent forward motion in the Senate, final passage of GSE legislation still remains in question. Both bills must be debated by the full House and Senate, where additional amendments are expected. In addition, the Senate bill passed on a straight party line vote, raising doubts about whether a bipartisan compromise bill can be crafted.

Pressure-Treated Wood Guidance Available

NAA/NMHC have updated the 2002 white paper on the voluntary phase-out of lumber preserved with chromated copper arsenate (CCA). The updated guidance reviews recent research oil CCA-treated wood, identifies CCA alternatives and offers safety recommendations for handling and maintaining CCA-treated wood in existing properties. It is posted at www.naahq.org/govern_affairs/.

Information compiled by NAA/NMHC Joint Legislative Staff: Senior Vice President for Government Affairs Jim Arbury; Lisa Blackwell, Vice President of Housing Policy; Vice President of Capital Markets and Technology David Cardwell: Vice President of Property Management Jeanne Delgado; Vice President of Communications Kim Duty; Vice President of Environment Eileen Lee, Tax Advisor Howard Menell; Vice President of Building Codes Ron Nickson; Chief Economist Mark Obrinsky; and Director of Property Operations Betsy Feigin Befus.