Earlier in 2020, a building owner in Culver City (who wasn’t a client of ours yet, but would become one shortly) was approached by one of his tenants with a mold complaint. The tenant had already ordered a mold test on the property at his own expense – he worked for a property management company, so he knew the system well. Sure enough, the owner ran a test, and it confirmed the tenant’s claim of a severe mold issue. The tenant hired legal representation, and demanded payment or else threatened to sue.
Though exposure to mold is obviously never a good thing, the connection between exposure and adverse health effects is not as clear-cut as you might think. The Center for Disease Control says there’s insufficient evidence to link things like memory loss and lethargy to mold, but an Institute of Medicine study in 2004 found enough evidence to link mold to upper respiratory tract symptoms in otherwise healthy people, among other things.
In this particular case, the tenant never offered any medical corroboration or documentation of injury, either because he had no symptoms or because he knew he didn’t have to. Though the owner’s attorney initially wanted to go ahead and take the case to mediation, both the owner and his attorney eventually decided that settling would be simpler overall, and would likely cost the same. In the meantime, the owner had brought us on to manage his property without telling us he was in the middle of all this, and when we found out, we had to inform him that we couldn’t continue representing him unless he got the situation resolved. In effect, we couldn’t risk being dragged into the middle of a long and expensive legal battle. So, on the advice of his attorney and financial advisors, he settled with the tenant out of pocket, for a sum of over $200,000.
Perhaps more frustrating to him than the sum he had to pay was the fact that all of this probably could have been avoided. Let’s explore how things might have gone differently if he had known from the start how to mitigate mold risk in rental property. I’m not a mold expert, and it’s impossible to eliminate risk entirely, but there are some steps that drastically reduce liability for property owners.
Insurance policies for Site Pollution generally only extend to sudden and accidental exposure, neither of which would refer to long-term mold issues. Furthermore, though certain insurance companies offer broader Pollution policies that cover mold exposure outside of the sudden and accidental designations, these typically have a premium starting at $10,000 and a minimum deductible of another $10,000. That’s $20,000 in expenses to the owner before the company makes a claim payment—not ideal. So, the answer doesn’t lie in insurance. I’ve written before about the importance of preventative maintenance and the concept is crucial to matters involving mold: you’re better off spending time and attention on preventing it from happening than on handling the fallout after it does.
Here are the two most important steps a property owner or their property manager can take to avoid a situation like the one described above:
- Have a certified professional check all potential mold hotspots in the unit between tenants. They’ll be able to tell if any mold has grown during the time since the last tenant moved in. The best management companies have in-house employees certified in mold inspections, who use fast and accurate technology that won’t affect the turn time or add much to the cost. Think of this as an ounce of prevention no property owner should go without.
- Inspect, inspect, inspect. Does your manager have an inspection calendar, with regularly scheduled visits to the interiors of all your units? If they’re not walking through every apartment twice a year, they might be missing crucial indicators of risk.
- Install water leak detection devices. Mold requires moisture to develop, and is typically caused by a hidden water leak on the property. There are several affordable water leak detection devices on the market that can help prevent this root cause. Again, this minor expense doesn’t compare to the financially devastating consequences of underpreparing.
A mold lawsuit is kind of like mold itself: only results from preventable factors. So, make sure you don’t wait until it’s too late. Take steps immediately to improve your mold protocol. It’ll increase the safety of your tenants and protect you from costly legal woes.
David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at 323-433-5254.