The issue of mold growth and its impact on the real estate profession is getting a lot of attention lately – especially in the U.S. While mold is something REALTORS need to be aware of, and definitely need to disclose, the jury is still out on whether mold is a huge health concern.

Disclosure is always a Realtor’s best course of action for any discovery of mold or other defect in a house they are selling. In the U.S., the National Association of REALTORS (NAR) is encouraging its state associations to advocate the adoption of laws that will provide a defence to claims against brokers who have truthfully disclosed any known problems.

Mold Basics

Mold is everywhere (indoors, outdoors, in food, etc.) Molds produce spores, which are also everywhere. There are thousands of types of molds (most harmless to people) but only a few are “bad molds.” Two “bad molds” most commonly referred to are in the genus Aspergillus and Stachybotrys chartarum. Some toxic and pathogenic molds produce, among other things, mycotoxins, which could be the alleged culprits in toxic mold cases. However in small quantities these molds would have little or no effect on people who are not hypersensitive to molds.

Most mold problems come from water damage. But, it doesn’t just have to be plumbing water damage or leaking roofs. It can also be as a result of too much humidity; poor ventilation systems; wet construction materials (e.g. wet wood); poor construction or design. Many buildings are now so “tight” for energy efficiency that there’s no way for moisture to leave the building.

An insurance issue?

Mold used to be considered merely one of the consequences that could result from water damage. Now, mold is being viewed as a cause of damage. Some insurance companies are considering excluding mold from both first party and third party coverages.

Property owners may be able to obtain site-specific environmental insurance that specifically includes mold coverage. However, since the premiums for environmental insurance are quite high (about $10,000 for $1 million of coverage) this may only be an option for commercial property owners. The insurer will check out the building and the maintenance, etc. to assess its risk before setting a premium and insuring the property.

Clean up

The key to controlling mold growth is to control the moisture and humidity levels. The first thing that needs to be done is to find the source of the water and moisture and stop it. Then, the mold should be cleaned up. However, once the problem gets beyond a small clean up, mold remediation may be needed. It is important to ensure that the entire problem area is remediated otherwise the mold infestation will grow back. Currently, the mold remediation industry is unregulated however, that might change, as there are some areas in the U.S. already developing remediation guidelines.

Is mold a health concern?

While no one disputes the fact that mold exposure may produce allergic responses in certain individuals, for every expert that says there is a link between indoor mold growth and severe health problems, there’s one who says there isn’t. Even the best-known U.S. decision, where a Texas jury awarded a woman $32 million against her insurance company was based on a claim of “bad faith” against the insurer, not personal injury. In that case, the judge would not even allow evidence of health problems because he held that the scientific evidence was too contradictory. The appeal decision in that case was recently issued. As expected, the appellate court totally eliminated the punitive damage award, which made up most of the $32 million and reduced the verdict to $4 million.

Buyer Beware

There are several cases dealing with indoor mold alleging (among other things) personal injury as a result of the mold that are heading towards the US courts. Precedent-setting decisions in these cases may still be several years away. This issue is still in its infancy in US. As the issue of mold emerges in US, buyers and sellers would be wise to be as well informed as possible. The best advice to sellers is to disclose any water problems or presence of mold up front. The best advice to buyers is “beware.”