June 2003 - Even as property owners and managers address such high-profile topics as terrorism insurance and synthetic leases, a far more prosaic force is invading the real estate environment: mold. A ubiquitous, insidious, silent and often invisible danger, mold represents � quite literally � a growing menace that disrupts and damages whatever it touches.

The asbestos dilemma of the mid-1980s probably offers the clearest analogy to the current threat. In both cases, a new and not particularly well-understood phenomenon surfaced relatively quickly. The response of those affected tended to be highly emotional in each setting, calling for fast and sensitive responses by building owners and managers. To the extent that regulations existed to deal with the problem, they were not evenly applied or interpreted.

At the same time, key distinctions can be drawn between asbestos and mold in at least two important respects. First, unlike asbestos, which was already in place in buildings before its hazards were well understood, mold accumulation can usually be prevented or controlled in built space through effective management techniques. Second, while asbestos litigants typically targeted manufacturers of the product in their lawsuits, plaintiffs in mold-related cases tend to identify building owners or managers as culprits.

Such litigation has reached epidemic proportions, with more than 9,000 claims of personal injury, property damage or other loss currently pending in the courts. Anecdotal evidence suggests that awards for property damages, alone, typically fall in the $200,000 to $400,000 range. As yet, there is insufficient history to categorize the financial impact of personal injury claims. Recently, however, a jury made a $34 million award in a case involving mold accumulation in a residential property. Even if awards of this magnitude are reduced or overturned on appeal, the time, resources and costs required to deal with these cases should not be underestimated. Already, mold identification and treatment projects have cost the real estate industry and its investment clients millions of dollars in actual costs, lost transaction fees, litigation expenses and property damage losses.

This is all taking place despite the fact that little consensus exists in the scientific community regarding the actual health risk presented by mold. Mold shares this characteristic with hundreds of other indoor air pollutants. The physiological responses of individuals to irritants, allergens, particulates and vapor-phase chemicals are difficult to define because of the synergistic effects these materials may exhibit. This uncertainty may translate to opportunities for plaintiffs; it will certainly continue to frustrate property owners and operators, who must address occupant concerns and define appropriate levels of care when confronting mold accumulation.

In the end, sufficient motivation for dealing aggressively with mold in real estate is reflected in the success of plaintiff claims for personal injury, property loss and other classes of liability. In the wake of early benchmark cases that were decided against property loss insurance carriers, the insurance industry has excluded itself from this market. Lenders and other real estate investors have followed suit, avoiding properties with mold
problems or demanding that treatment of mold precede a transaction.

The reluctance to assume responsibility for treating mold problems may be less a reflection of the expense of the cure than an acknowledgment of the complexity and disruption of removal. Sources of mold accumulation can be elusive, and removing it can significantly disturb the workplace for occupiers.  This also distinguishes mold from asbestos, which can most often be managed in place until removal is convenient. Evidence of mold growth is generally regarded as demanding an immediate response.

Identifying the Problem

Mold and mold spores are ubiquitous in the environment. They become a problem in the built environment when they begin to grow, or amplify, on building components. Often visually apparent on finished surfaces, mold can be difficult to detect on unfinished or irregular interior components. And, while several tests are available to detect mold concentrations, none characterizes mold reliably or definitively unless it is accompanied by a thorough physical inspection.

Mold cannot begin to grow without a source of water. Some species may thrive on little more than humidity,however,so concluding that mold might be a problem limited to the Southeast or Northwest only raises false hopes. Recently, for example, an extensive � and expensive � mold removal project was initiated at a commercial property located in the Mojave Desert. The trouble stemmed from water used to irrigate plantings next to the building.  Problems can also be introduced by interior finishes, occupant uses and operator practices. Such common interior treatments as vinyl wall coverings, wall-mounted fixtures or even artwork, can trap water and initiate amplification. The susceptibility of an interior to damage may be enhanced by the location, use or design of the space. 

Sub-grade or ground-contact units, interior corners, north facing units and infrequently accessed areas all suffer increased risk of excessive humidity and water accumulation.  Finally, the common practice of suspending HVAC service to unoccupied or unused areas can allow humidity levels to exceed optimal ranges.

As a result, owners of real estate assets are well advised to carefully review the physical characteristics of their properties, the condition of each property and the operator�s procedures relating to the discovery and control of water accumulation or intrusion. Some building envelope designs present a greater risk of water intrusion unless they are maintained flawlessly. And, while defective building systems or components such as windows or roofs are common points of failure, architectural features should not be overlooked during the property review.  Curtain wall systems that integrate External Insulation Finish System or (EIFS), some masonry designs or even balconies may demand unusual care to maintain their integrity. Common building elements�planters, irrigation systems, fountains and other landscaping features, for example�often challenge and defeat the integrity of building envelopes.

Designing the Solution

Real estate managers and operators form the first line of defense against mold. Their ability to respond quickly and aggressively to its discovery, or to conditions that could promote the appearance of mold at their property, will produce a dramatic increase in successful outcomes.

The venerable advice, �An ounce of prevention is worth a pound of cure,� applies. Property operators are well advised to identify areas prone to risk to anticipate and deflect problems before they occur. The development of a systematic inspection routine for these areas can be an effective way to locate water accumulation or mold amplification before either condition becomes a costly issue. Routine inspections can be augmented by measuring relative humidity and water content using commercially available detection equipment. 

Scheduled inspections also help to establish baseline conditions that can be tracked over time to identify incremental changes that may indicate impending problems. Unscheduled inspections should follow significant weather events, plumbing failures or any event that results in the uncontrolled release of water, or the introduction of excessive humidity, into a space. A range of different tests is also available for investigating the presence of mold in the building, and there are even methodologies which allow samples to be taken from inside walls. In addition, an effective indoor air-quality management program helps to avoid some, but not all, of the problems associated with mold accumulation.

An immediate, appropriate and thorough response to the introduction of water, can limit�or even prevent�the establishment of active mold colonies. When water intrusion or accumulation is detected, the property operator has a limited amount of time to remove the water. The general consensus is that clean water removed within 24 to 48 hours is unlikely to spur the amplification of mold. Should gray or black water be introduced into the building environment, however, even immediate intervention may not be sufficient to prevent mold growth. The restoration industry has developed various specialized methods and performance standards to ensure the effectiveness of water removal techniques (see IICRC S500 Standard and Reference Guide for Professional Water Damage Restoration).

The treatment of mold amplification is generally unregulated, although several states have entered the arena recently. The best and most widely accepted protocol is an EPA guidance document �Mold Remediation in Schools and Commercial Buildings.� The EPA strategy outlines a stratified approach to mold removal in which the level of care and complexity increases as the size of the affected area expands. Caution is still advised when applying the guidance. Disparate opinions surface within the environmental professional services industry when details of project design, oversight and testing are factored into specific cases. The National Multi Housing Council also serves as a good resource for information about identifying, detecting and correcting conditions that contribute to mold growth.

The effect that mold is currently having on the real estate market will eventually begin to dissipate, for many of the same reasons that the impact of asbestos has abated over time. Investors, operators and occupiers will become more comfortable as they gain knowledge and experience. Insurance carriers, sensing a new source of revenue, are developing new products to reenter the market. The sensitivity of building trades to water intrusion is increasing, improving their response and limiting potential damage. In addition, the trades will become skilled at the treatment of minor mold amplification events.

Until then, however, unless the real estate industry and its clients take an active stance in the fight against mold, both will continue to suffer from the unexpected and undesired arrival of this dangerous, uninvited guest.
 

Jones Lang LaSalle (NYSE: JLL) is the world�s leading real estate services and investment management firm, operating across more than 100 markets on five continents. The company provides comprehensive integrated expertise, including management services, transaction services and investment management services on a local, regional and global level to owners, occupiers and investors. Jones Lang LaSalle is the industry leader in property and corporate facility management services, with a portfolio of approximately 725 million square feet under management worldwide.

To learn more about mold and its prevention, contact the author, John Craig at +1 312 228 2094 or [email protected].