Rising mold-related costs bedevil building industry

[Guest guest]

http://www.bizjournals.com/sacramento/stories/2002/07/01/story8.html

From the June 28, 2002

Mold Rush

Rising mold-related costs bedevil building industry

Mike McCarthy Staff Writer

Hiding behind walls, under carpets and inside ceilings, mold is as old as

nature. For most of history it has gone barely noticed in the home except as

an occasional, harmless discoloration of bathroom walls and fixtures.

But during the past decade, mold has become a threat to the building

industry, thanks to the mushrooming spread of lawsuits from tenants and

homeowners who say mold has made them sick.

One result has been higher insurance costs for builders. Another result,

real estate observers predict, will be higher rents and home prices as

landlords deal with increased expenses for court awards, testing and

treating mold.

The industry has developed a bunker mentality. " I hate mold, " said Jim

Lofgren, executive director of the Rental Housing Association of the

Sacramento Valley, an apartment landlords group. " It's a headache that

should go away. But I think we're going to have this migraine for some

time. "

Why it's happening now: Modern, energy-efficient construction has

unwittingly helped mold spread, said Day, an executive with

Sacramento's Beutler Heating and Air Conditioning Inc. The company installs

so many heating and air conditioning systems that Beutler is one of

Sacramento's 100 largest private companies.

Mold grows in moist environments sealed against outside ventilation, often

in concealed spots where people can't see the crud to wipe it away. Airtight

buildings provide these conditions more readily than older, draftier

buildings do. Mold especially loves it when a leak keeps replenishing a

source of water.

Even so, modern airtight construction might not be a problem if renters or

homeowners would open their windows more often. Office tenants have less

choice, since most commercial windows cannot be opened.

Compounding the problem, the country's building codes on ventilation have

not been adapted to the newer codes on energy conservation, Day said. As a

result, even mechanical ventilation is often inadequate to dry out the wet

spots.

The result is an airtight, watertight haven for mold colonies. Some

observers believe no modern environmental change has done more for the

spread and well-being of mold than the expansion of human populations inside

tight buildings.

Mold can be an allergen and, rarely, toxic. Because mold thrives on cellular

food like wood, most of the trouble is visited on houses, apartments,

condominiums and low-rise commercial buildings that use wood framing. That's

why so much of the publicity about mold involves housing.

A big impact on apartments: The mere presence of mold isn't often a problem

in housing, experts say. Cleaning it out or repairing a leak can usually

solve the problem. But when mold is discovered too late, susceptible

occupants have filed lawsuits that led to huge awards. Those instances

remain relatively rare. But they're numerous enough to inspire insurers to

back away from mold coverage, and lenders are growing dubious.

" The mold issue is having the single greatest impact on multifamily housing

I've seen in 30 years in the business, " said Dennis Treadaway, president of

Sacramento-based FPI Management Inc.

FPI, the largest local apartment landlord, manages more than 13,000

apartments locally and more than 22,000 nationally.

Not only are the lawsuits pushing insurance premiums through the ceiling, he

said they are making insurance increasingly unavailable. Many landlords

worry that without proper insurance, mold litigation could force them into

bankruptcy.

" There isn't a landlord I know who isn't worried, " Treadaway said.

The insurance hikes can be financially deadly. One local landlord recently

received a mold-covering insurance premium increase of $35 per unit per

month, Lofgren said -- more than $21,000 a year on the 52-unit complex.

High quotes for repairs: Added to the insurance are the high costs of testin

g and remediation when tenants find mold or the leaks that can support mold.

Testing is often needed to appease tenants even when the mold is likely

harmless.

" You've got a fear factor whenever you see mold, " said Flis, an

apartment broker with Marcus & Millichap commercial real estate brokerage.

" So testing is needed before people panic. "

Tests can run from around $200 to " tens of thousands of dollars " for larger

areas, said Jeff Hicks, a principal with Geomatrix Consultants Inc., an

environmental consultant that does mold testing.

Occasionally, he is called in to give a second opinion on cost estimates

made by remediation companies. Some remediators have little in the way of

qualifications, he said, and seem to see the mold game as easy pickings.

" Some of the charges are amazing, " he said. " Some may charge, for instance,

$100 to vacuum floors and things like that. "

He was called in to examine one estimate for more than $7,000 to fix 10

square feet of mold-covered wall by replacing the sheetrock. " It should cost

$1,000, " he said. " You see stuff like that and say, `Geez, I need to get

into that business.'

" Clients are so anxious, they often say just do it, " Hicks said. " Everybody

is panicky. "

One homeowner smelled mold and called in a remediator. The remediator found

dampness in the house's crawlspace and mold on the floor beams. He offered

to fix the crawlspace, remove the mold, and clean all of the home's

furniture, clothing and other articles for $120,000, Hicks said.

" We tested the mold, " he said. " It was the same as lumberyard mold,

completely normal. There was no sign of mold contamination in the house at

all. "

Among the many problems facing landlords is the lack of any accepted

standards for being a mold expert. " Anybody can hang a shingle out saying `I

do mold evaluation,' " he said. " It's totally unregulated. "

The higher insurance premiums or lack of coverage, plus the testing and

remediation, Lofgren said, are " absolutely driving up rents. "

Building dry: Generally, the homebuilding industry tries to head off trouble

by building to prevent the leaks that contribute to standing moisture.

" We take precautions to make sure the homes are moisture-free, " said Steve

Tofft, president of Myers Homes. " Mold needs dampness. If you don't have

dampness, you don't have a problem. "

The company designs houses to be dry. During building, workers examine

lumber to make sure it is dry before it goes into a home. Among other

measures, crews monitor poured concrete to make sure it dries, he said.

Other homebuilders said much the same: Good building practices are key. And

all agreed that rising insurance rates and insurers' elimination of mold

coverage are problems.

Resale home sellers, buyers and agents know about the risks from mold. Mold

testing before buying a house is routine, especially when home inspectors

come across leaks or signs of mold, said Jim Day, manager of Lyon &

Associates Realtors' Sierra Oaks office. Usually, the sellers take care of

the problem before a sale. Sometimes the buyers agree to deal with it, he

said, and there have been no resulting lawsuits.

Cook, head of Cook Realty, said his agents rarely run across mold,

probably because the average resale in his territory -- around Land Park --

is older and better ventilated. Among his clients, he said the only

memorable case of mold he has run across occurred when a working couple

never opened their windows at home.

Cantrell, head of Security Pacific Real Estate Services, said mold is

not significant in resales in this area.

Less commotion for commercial: Compared to apartments or houses, Greater

Sacramento commercial buildings have generally had less of a problem with

mold. But there have been exceptions.

The California Job Journal sued its landlord, Pacific Gulf Properties, in

September 2000 after employees became ill from working in the landlord's

mold-ridden office space on Tribute Road, said Jay Verdoorn, the Job

Journal's communications director. That suit was settled and the building

was gutted and remodeled. Pacific later sold the building.

The city of Sacramento bought the old " Courtyard " office complex on Freeport

Boulevard from Buzz Oates and had to remove mold in its basement. There was

no litigation.

Commercial buildings generally benefit from the frequent use of their doors,

letting in air that dries standing moisture, said Phil Harvey, an architect

with LPA Sacramento Inc.

Oates has virtually no incidence of mold in his 17 million square feet of

warehouse, office and retail space within 50 miles of Sacramento, said Jack

Spiegelman, Oates' property manager. Spiegelman added that mold and leakage

are pretty much eliminated in the buildings because they are remodeled when

new tenants lease space.

Rob Cord, CB Ellis' director of asset services, said there's never

been any notable mold issue with the 8.7 million square feet of commercial

space that his company manages locally.

" Our managers always look for seepage and mold, " he said. " And tenants are

very aware of the issue. "

But the Job Journal lawsuit means that commercial buildings are not

invulnerable to mold problems.

Some people are cynical about it.

" It's going to be a huge arena of litigation, " said Frisch, manager of

Cornish & Carey/Oncor International's Sacramento office. " There are

opportunistic plaintiffs and plenty of attorneys to accommodate them. "

Copyright 2002 American City Business Journals Inc.

[Guest guest]

Caution: Ventilation and open windows can cause mold problems during

wet outside conditions. Ventilation and open windows only helps when

the outside conditions provide a indoor relative humidity of less

than 50%. If it is wet outside and the outdoor temperature is +50^F

for more than a couple days, indoor dehumidification is the only

solution. During wet outdoor conditions, a tight building makes it

much easier to control indoor humidity. Monitor your indoor humidity

with a relative humidity meter. Its important.

> http://www.bizjournals.com/sacramento/stories/2002/07/01/story8.html

>

> From the June 28, 2002

> Mold Rush

> Rising mold-related costs bedevil building industry

> Mike McCarthy Staff Writer

>

> Hiding behind walls, under carpets and inside ceilings, mold is as

old as

> nature. For most of history it has gone barely noticed in the home

except as

> an occasional, harmless discoloration of bathroom walls and

fixtures.

>

> But during the past decade, mold has become a threat to the building

> industry, thanks to the mushrooming spread of lawsuits from tenants

and

> homeowners who say mold has made them sick.

>

> One result has been higher insurance costs for builders. Another

result,

> real estate observers predict, will be higher rents and home prices

as

> landlords deal with increased expenses for court awards, testing and

> treating mold.

>

> The industry has developed a bunker mentality. " I hate mold, " said

Jim

> Lofgren, executive director of the Rental Housing Association of the

> Sacramento Valley, an apartment landlords group. " It's a headache

that

> should go away. But I think we're going to have this migraine for

some

> time. "

>

> Why it's happening now: Modern, energy-efficient construction has

> unwittingly helped mold spread, said Day, an executive with

> Sacramento's Beutler Heating and Air Conditioning Inc. The company

installs

> so many heating and air conditioning systems that Beutler is one of

> Sacramento's 100 largest private companies.

>

> Mold grows in moist environments sealed against outside

ventilation, often

> in concealed spots where people can't see the crud to wipe it away.

Airtight

> buildings provide these conditions more readily than older, draftier

> buildings do. Mold especially loves it when a leak keeps

replenishing a

> source of water.

>

> Even so, modern airtight construction might not be a problem if

renters or

> homeowners would open their windows more often. Office tenants have

less

> choice, since most commercial windows cannot be opened.

>

> Compounding the problem, the country's building codes on

ventilation have

> not been adapted to the newer codes on energy conservation, Day

said. As a

> result, even mechanical ventilation is often inadequate to dry out

the wet

> spots.

>

> The result is an airtight, watertight haven for mold colonies. Some

> observers believe no modern environmental change has done more for

the

> spread and well-being of mold than the expansion of human

populations inside

> tight buildings.

>

> Mold can be an allergen and, rarely, toxic. Because mold thrives on

cellular

> food like wood, most of the trouble is visited on houses,

apartments,

> condominiums and low-rise commercial buildings that use wood

framing. That's

> why so much of the publicity about mold involves housing.

>

> A big impact on apartments: The mere presence of mold isn't often a

problem

> in housing, experts say. Cleaning it out or repairing a leak can

usually

> solve the problem. But when mold is discovered too late, susceptible

> occupants have filed lawsuits that led to huge awards. Those

instances

> remain relatively rare. But they're numerous enough to inspire

insurers to

> back away from mold coverage, and lenders are growing dubious.

>

> " The mold issue is having the single greatest impact on multifamily

housing

> I've seen in 30 years in the business, " said Dennis Treadaway,

president of

> Sacramento-based FPI Management Inc.

>

> FPI, the largest local apartment landlord, manages more than 13,000

> apartments locally and more than 22,000 nationally.

>

> Not only are the lawsuits pushing insurance premiums through the

ceiling, he

> said they are making insurance increasingly unavailable. Many

landlords

> worry that without proper insurance, mold litigation could force

them into

> bankruptcy.

>

> " There isn't a landlord I know who isn't worried, " Treadaway said.

>

> The insurance hikes can be financially deadly. One local landlord

recently

> received a mold-covering insurance premium increase of $35 per unit

per

> month, Lofgren said -- more than $21,000 a year on the 52-unit

complex.

>

> High quotes for repairs: Added to the insurance are the high costs

of testin

> g and remediation when tenants find mold or the leaks that can

support mold.

> Testing is often needed to appease tenants even when the mold is

likely

> harmless.

>

> " You've got a fear factor whenever you see mold, " said Flis,

an

> apartment broker with Marcus & Millichap commercial real estate

brokerage.

> " So testing is needed before people panic. "

>

> Tests can run from around $200 to " tens of thousands of dollars "

for larger

> areas, said Jeff Hicks, a principal with Geomatrix Consultants

Inc., an

> environmental consultant that does mold testing.

>

> Occasionally, he is called in to give a second opinion on cost

estimates

> made by remediation companies. Some remediators have little in the

way of

> qualifications, he said, and seem to see the mold game as easy

pickings.

>

> " Some of the charges are amazing, " he said. " Some may charge, for

instance,

> $100 to vacuum floors and things like that. "

>

> He was called in to examine one estimate for more than $7,000 to

fix 10

> square feet of mold-covered wall by replacing the sheetrock. " It

should cost

> $1,000, " he said. " You see stuff like that and say, `Geez, I need

to get

> into that business.'

>

> " Clients are so anxious, they often say just do it, " Hicks

said. " Everybody

> is panicky. "

>

> One homeowner smelled mold and called in a remediator. The

remediator found

> dampness in the house's crawlspace and mold on the floor beams. He

offered

> to fix the crawlspace, remove the mold, and clean all of the home's

> furniture, clothing and other articles for $120,000, Hicks said.

>

> " We tested the mold, " he said. " It was the same as lumberyard mold,

> completely normal. There was no sign of mold contamination in the

house at

> all. "

>

> Among the many problems facing landlords is the lack of any accepted

> standards for being a mold expert. " Anybody can hang a shingle out

saying `I

> do mold evaluation,' " he said. " It's totally unregulated. "

>

> The higher insurance premiums or lack of coverage, plus the testing

and

> remediation, Lofgren said, are " absolutely driving up rents. "

>

> Building dry: Generally, the homebuilding industry tries to head

off trouble

> by building to prevent the leaks that contribute to standing

moisture.

>

> " We take precautions to make sure the homes are moisture-free, "

said Steve

> Tofft, president of Myers Homes. " Mold needs dampness. If you don't

have

> dampness, you don't have a problem. "

>

> The company designs houses to be dry. During building, workers

examine

> lumber to make sure it is dry before it goes into a home. Among

other

> measures, crews monitor poured concrete to make sure it dries, he

said.

>

> Other homebuilders said much the same: Good building practices are

key. And

> all agreed that rising insurance rates and insurers' elimination of

mold

> coverage are problems.

>

> Resale home sellers, buyers and agents know about the risks from

mold. Mold

> testing before buying a house is routine, especially when home

inspectors

> come across leaks or signs of mold, said Jim Day, manager of Lyon &

> Associates Realtors' Sierra Oaks office. Usually, the sellers take

care of

> the problem before a sale. Sometimes the buyers agree to deal with

it, he

> said, and there have been no resulting lawsuits.

>

> Cook, head of Cook Realty, said his agents rarely run across

mold,

> probably because the average resale in his territory -- around Land

Park --

> is older and better ventilated. Among his clients, he said the only

> memorable case of mold he has run across occurred when a working

couple

> never opened their windows at home.

>

>

> Copyright 2002 American City Business Journals Inc.