What property owners need to know about mold. (Insiders Outlook).

Concerns about potential adverse health effects from exposure to toxic mold and the effect of those concerns on property and rental values have been growing almost as fast as the menacing fungus has begun eating its way through the walls of thousands of residences, office buildings, hotels and other properties in the United States.

A recent wave of publicity about multimillion dollar judgments and settlements in mold lawsuits have raised public consciousness of the. problem and, while the scope of the problem has yet to be determined, it is clear that questions regarding the risk presented by mold and liability related to that risk are unlikely to be resolved soon. Today, property owners and managers, brokers and lenders, builders and contractors must all be aware of mold investigation, clean-up and control procedures, risk allocation vehicles to spread risks related to mold exposures, and, most importantly, best management practices to avoid these risks altogether.

Mold grows in warm, moist environments where organic material such as wood or paper is present, providing the nutrients for the growth of mold. Only a handful of the estimated 100,000 species of mold are considered potentially harmful to human health. Adverse health effects attributed to mold with varying levels of certainty range from allergic reactions to neurological damage.

Human exposure to mold occurs by inhalation, skin contact or ingestion of contaminated foods. Inhalation of mold spores' is the most common method of exposure and can be intensive where mold become airborne when, for example, mold colonies are disturbed by construction or demolition or where they grow in and are circulated by heating, ventilating and air conditioning systems.

Water is one of the necessary elements for mold growth. Older buildings, which are more susceptible to interior leakage from pipes and plumbing, can provide the necessary water to encourage mold growth. In addition, some new construction techniques--such as sealed buildings and central heating and air conditioning systems that may circulate mold and can provide extra humidity--also provide a good growth medium for mold.

Mold litigation typically involves claims by tenants or occupants of properties against property owners, as well as against property managers, architects, builders, and contractors, for the costs of removal of mold and for injuries allegedly caused by the mold contamination. Another major source of litigation are claims by property owners or other parties for insurance coverage for clean-up costs and for costs of defending litigation arising from mold contamination. Widespread mold in large buildings also presents a significant liability risk due to the multiplication of otherwise minor individual ages claims. According to National Underwriter Property & Casualty--Risk & Benefits Management, about 9,000 lawsuits involving toxic mold have been filed in the United States and Canada during the last 10 years.

Even when lawsuits are not filed, mold claims can be costly. In fact, in response to the growing concern over such claims and uncertainty about the application of various general policy exclusions for pollution related matters, more and more insurers are adding specific mold exclusions to their policies. Some are eliminating mold coverage all together, particularly in residential policies in humid areas such as the Southwestern United States. As a result, it is critical for building owners and managers to take certain steps to protect themselves and to be prepared to promptly address issues should they arise.

Public health and environmental agencies widely recommend immediate abatement of mold growth. Their policy is that if mold is seen or smelled, there is a potential health risk; therefore, whether the mold is toxic or not, it should be removed. While this may be a safe, conservative position to take, it can result in significant expenses and major disturbances to properties and their tenants. It can also result in unnecessary expenses in removing nontoxic mold or increased expenses disturbing mold through improper removal, similar to the early days of asbestos removal when non-friable asbestos was disturbed and removed rather than leaving it untouched or encapsulating it.

When it is appropriate to remove mold, the guidelines for mold remediation published by the Environmental Protection Agency and by state agencies should be adhered to. Cleanup methods can include the simple use of a damp cloth with bleach and water to wipe down a small contaminated surface; the use of a wet vacuum, steam cleaner or high-efficiency particulate air vacuum; or, as a last resort, the removal and disposal of contaminated material by experienced health and safety professionals. All open water sources should be identified and eliminated to end the spread and prevent the recurrence of mold.

If a potential mold problem exists, it is important to get experienced professionals involved to conduct sampling and recommend appropriate remediation. The response needs to be swift and with an eye to protecting against litigation as well as any risk to health.

Mold is also an area that purchasers, lenders, and tenants of real estate need to be aware of. While it is not appropriate to test for mold as part of every real estate transaction, it should be a consideration, particularly if there are warning signs. Serious water leak problems or a musty, moldy smell should be red flags for further investigation and tenants, building personnel and others should be aware to report potential problems promptly. Due diligence checklists should also be revised to include appropriate questions as to typical mold warning signs and environmental engineers should be asked to consider whether mold testing is needed. In addition, mold-related issues should be considered in documenting acquisitions, leases, loans and other real estate transactions as well as in negotiating insurance coverage so as to obtain environmental insurance for known or potential problem situations or to address mold exclusions.

The bottom line: When mold problems do arise, they should not be taken lightly. They call for a prompt response that may well require professional assistance.