Trouble in the air: sick buildings are a legal time bomb for landlords.

The entire California real estate market is sitting on a conservation time bomb.

Known as "Indoor Air Quality" (IAQ) lawsuits, it's a time bomb that will lead to multi-million dollar verdicts against building owners, realty management firms and their agents, architects, general contractors and manufacturers of ventilating systems. IAQ applies equally to commercial, industrial and residential buildings, as well as to those owned by government agencies at the local, state and national levels.

A healthy building conserves energy and protects the health of the occupants. In one Los Angeles downtown combination commercial-residential building, the owner and management have been informed several times that their buildings are sick, but the warnings have been disregarded.

Before the end of 1992, the tenants will file a class action lawsuit against the builder, landlord, the realty management firm, and others involved in the construction and maintenance of those buildings. Their suit will make the 1990 Call v. Prudential Ins. Co. damage verdict look like an ant walking on an elephant's foot!

Read your building's insurance policy! Read the fine print. Many of those policies have a clause that abrogates the insurance company's liabilities if the insured represents that the building has been contracted and is maintained to conform to ASHRAE Standard 62-1981 or 62-1989.

The Los Angeles Court in the Call v. Prudential case ruled that this ASHRAE Standard established a minimum standard of care that must be adhered to by the owner, landlord, management firm and others. The decision, if appealed, will probably be affirmed by the higher courts. A cautionary note must also be given to employers that a few workers' compensation insurance companies are contemplating canceling policies issued to employers who refuse to vacate premises in sick buildings.

Federal report

The U.S. EPA has issued its official report stating that today between 25 and 35 percent of all workers now work in sick buildings. A 1988 BOMA research study supported the EPA study that nearly 25 percent of workers' illnesses led employers to move from a building due to improper heating, ventilating, and/or air conditioning problems.

What is a sick building? According the EPA regulations, accepted by state and federal courts, a building is considered sick when occupants complain that they have health or comfort problems that can be legally proved to be associated with working in or being in that building on a regular basis. The law calls such illness "building related illness" (BRI).

The EPA created the standards now used in a lawsuit to establish SBS and BRI: When a substantial percentage of the building occupants complain of symptoms associated with acute discomfort (such as headaches; eye, ear, nose or throat irritation; dry cough; dry or itchy skin; dizziness; nausea; concentration difficulties; sensitivity to odors; and fatigue). Although the cause that has brought about those difficulties is not known, it is known that those symptoms or difficulties disappear when the complainants vacate the building.

Naturally, lawyers defending those involved in an SBS or RBI lawsuit may proclaim that the plaintiffs had a few of those illnesses previously. However, the law is that if the symptoms have been exacerbated by the conditions in the SBS building and are BRI related, then a jury can determine a smaller damage amount.

No defense

Nor will the court recognize as a defense that the building is now being used in ways not foreseen by the original designers, or from poor architectural design. Generally, a healthy building becomes a sick building because of inadequate ventilation, pollutants created inside the building, outside contaminants entering the building or biological contamination.

Before the 1973 oil embargo, most HVAC systems were designed and operated to provide 15 cubic feet per minute (cfm) of outside air for each building occupant.

The oil embargo then brought about a surge in conservation which, in turn, limited cfm to a ridiculous 5 cfm. At the conclusion of this embargo, building owners, landlords and realty management firms decided to retain the 5 cfm figure because it increased the rate of profit from their buildings.

That was the beginning of SBS and BRI. In 1981, and again in 1989, ASHRAE reaffirmed the 15 cfm rule and that standard has been upheld by the courts. Today, that SBS is the time bomb that will make many members of the legal profession richer.

Indoor pollutants are those that come from within the building itself, and woe to the landlord who fails to know them! Those pollutants, known as VOCs, include adhesives, carpeting, cleaning agents, copying machines, formaldehyde, laser copiers, laser printers, manufactured wood products, paint fumes, sterilant gases, tobacco smoke and vinyl chloride.

In 1990 a Missouri jury awarded $16 million to a family who suffered from "chronic formaldehyde poisoning" from building materials used to construct their home. One can imagine the size of the verdict where dozens or scores of office workers in a sick building become ill due to pollutants that should have been eliminated.

Outside sources

Outside sources can also create SBS and BRI symptoms. Pollutants from motor vehicle exhausts, plumbing vents, toilet and kitchen odors enter the building through improper air intakes, windows and other openings. A building with an underground garage generates carbon monoxide and nitrogen dioxide. All those conditions can be corrected by the building owner and agent. When a landlord rents space there is an implied warranty that the rented area has been rented for the use desired by the lessee.

Legionnaire's disease can be traced to HVAC symptoms. This kind of biological contamination is caused by bacteria, molds and their spores, pollen, and viruses. These generally breed in stagnant water allowed to accumulate in humidifiers and cooling coil pans, water collecting on ceiling tiles, carpeting, insulation or internally-lined duct work.

Biological contamination leads to coughs, chest tightness, fevers, chills, muscle aches, mucous membrane irritation and upper respiratory congestion. The court held in the "Legionnaire" cases that the Philadelphia hotel where the first cases occurred failed to use diligent care in the maintenance of its ventilation systems and upheld huge damages awarded to the families.

What can be done in SBS cases? The solution is to call an IAQ consultant. The consultant can identify the existing or potential problems and obtain preliminary information on the complaints.

After that phase is concluded, a qualitative diagnostic phase is conducted which includes a series of recommendations for remedial actions, maintenance procedures and building systems operation.

The cure

The cost of curing a sick building is tiny compared to legal fees, court costs and a damage verdict, which may amount to millions of dollars. For every dollar spent to maintain conditions for a healthy building, the return can be as high as 10,000 to 1.

The employer and employees win damages across the board, the employer for loss of profitability, for paying increased employee health insurance premiums, for "sick leave" pay, and relocating, as well as the increase in rent in the new quarters. Employees can also recover huge damages for health and loss of income.

Today architects, engineers, real estate developers, general contractors, school executives, employers, factory managers, realty management firms, interior designers, and manufacturers of air conditioning products and systems can now be held liable for IAQ lawsuits and damages if the jury finds one, several, or all liable for damages to the plaintiffs.

The solution is simple and very reasonable when compared to refusing to restore the building's health. Conform to the terms of the lease, whether it be written or verbal, and all promises made to meet those terms.

Lawyers have convinced lay persons that a written contract, drawn up only by lawyers, is necessary to protect the creation of a contract between parties to an agreement, including a lease. Nothing is further from the truth, for actions based upon verbal agreement or statements between the parties are as binding as a written agreement signed by both parties. This is true with one exception: where the statute of frauds is involved, and even that has exceptions.

Implied warranties

The law implies that the lessor has leased premises which are structurally safe for the purposes desired by the lessee as stipulated in the lease. Thus, a landlord who leases premises that include an air and heat ventilating system implicitly warrants that the system will be property maintained so that it will not injure the health of the occupants.

In fact, some lawyers may decide to sue on the basis of negligence, not on the

lease. If the building owner, or agent, installed an air conditioning unit that was incapable of functioning properly, there was fraud and misrepresentation by the landlord to the lessee, and such fraud led to damages to the lessee and its employees using the premises.

A classic example of a promise not made in writing comes about when the landlord or agent verbally promises to correct a defective air conditioning system. The tenant makes several complaints over a short period of time, informing the agent that employees are complaining of illnesses.

In one case a firm leased offices in a building that subsequently became sick after the realty management firm later signed a lease with a company whose machinery released fumes that penetrated the ventilating system.

The firm gave notice as instructed in the lease and moved into another building. The landlord filed suit for rent due under the lease. The management firm countersued, with the employees joining the suit as a class action operation, which the court granted. Who won the verdict?

In the first case, where the tenant refused to pay the remaining portion of the rent due on the lease, the tenant won on the grounds of "promissory estoppel". The building owner argued that even though its agent had promised to repair the air conditioning system, the promise was made verbally and after the lease was executed.

The court ruled that the promise to correct the defective air conditioner was valid. Thus, the landlord was "estopped" from asserting that there was no written statement in the lease and that there was no legal consideration for the promise to repair the air conditioning system.

Second case

The second case was won by the tenant on the basis of fraud and misrepresentation. The court held that the landlord knew the type of machinery in question would cause indoor pollution.

However, the law permits a landlord, upon receiving notification of IAQ conditions in the building, to repair the building to proper ASHRAE 62-1989 standards. To replace faulty or dirty air conditioner filters takes less than 24 hours. It is no defense by landlords to plead that they could not obtain parts or labor to replace those filters or repair the equipment. One may limit the damages, but one cannot undo the damage.

All over the country, the "time bomb" is exploding. On June 18, 1991 the first SBS suit was filed in Connecticut in the case of Padgett vs. Capital West Associates, Ltd. The suit was a class action suit on behalf of 60 insurance office employees who charged that the building's condition affected their health. The defendants include the building owner, the building managing agent and the previous owner.

Reno suit

In Reno, employees of a hotel casino filed a multi-million dollar suit against their employer, the insurance company, and the pest exterminator who used pesticides to control cockroaches.

Any HVAC company that has sold, installed or is servicing air conditioning equipment is as liable for damages resulting from an SBS building, as is the building owner, the realty management company or the maintenance company serving the sick building.

In October 1991, eight employees of the EPA in the Washington, D.C. headquarters filed a $38 million dollar lawsuit against the owner and managing agent of the EPA's offices on the grounds that the eight employees became ill from exposure to airborne toxins that accumulated after a negligent renovation. The lawsuit includes as defendants the company that installed and maintained the HVAC system.

There is no doubt that from 1992 on, SBS cases will clog the court system as white collar workers demand healthy conditions.

HVAC manufacturers, wholesalers, general or subcontractors, and installing and maintenance firms will automatically be included as defendants in SBS lawsuits. Thus, it behooves all parties to make sure that they have the proper insurance policy to cover themselves in the event they are involved in an SBS lawsuit.

Building owners and realty managers should pay heed to the EPA's "Air & Radiation Revised Report" of July, 1990, which stated that although electronic air cleaners and ion generators use an electronic charge to remove airborne particles, those devices may also produce ozone, a dangerous lung irritant.

The EPA Report also pointed out that gaseous particles may only be removed if the air filter cleaners contain special material, such as activated (carbon) charcoal to facilitate removal of harmful gases.

Courts now take notice that using a product injurious to the health of an employee, tenant, or purchaser of a residence is sufficient to support a damage verdict against the owner of the building, the building manager, and even the manufacturer or supplier of the ventilating system if the product used is insufficient to maintain the health of the building occupants.

Stanley J. Marks is an attorney and director of marketing and sales for Aero Hygienics Inc., a Los Angeles-based engineering firm specializing in SBS.