Sick building syndrome

What must you disclose about this potentially serious problem?

by Ron Walker   Black mold! Toxic bacteria! Biological organisms! The presence, or possible presence, of such items in real property has received recent attention. What are these things? What must be disclosed? What liability do they present for sellers, buyers, and brokers?

The following is an excerpt from an article prepared by Larry Nettles for the 2000 Commercial Real Estate Course hosted by the Texas A&M Real Estate Center and South Texas College of Law. Larry is a partner with the Vinson & Elkins law firm in Houston. He specializes in administrative and environmental law.

There is a growing awareness that some internal building environments contain concentrations of chemicals and biological organisms (mold spores, fungi, bacteria) that may cause acute and chronic adverse health effects in building occupants–a condition known as the "sick building" syndrome.

The causes of sick building syndrome may be many: poor ventilation or inadequate moisture removal; high concentrations of chemicals from carpet, furniture, etc., such as formaldehyde; poorly functioning boilers or heaters giving off high concentrations of carbon monoxide; indirect exposures from smokers, and so on.

Legionnaire’s disease is perhaps the most prominent example of a public health problem caused by the construction or operation of a building (in that case, microorganisms linked to poor cooling-water-tower operation), but mold, fungus, and bacteria can grow in many indoor environments.

Where it occurs, the solution to sick building syndrome can range from the simple, cheap, and easy (e.g., opening closed air vents) to the complex, puzzling, and difficult (e.g., complete replacement of the air handling system). One elementary school in Baytown had to be destroyed because the mold growth in the ceiling had become so pervasive that decontamination of the building wasn’t possible.

The sick building syndrome may affect the habitability of the building, and may create significant threats to the health of the occupants. The fungus Stachybotrys can release "mycotoxins" into the air; Stachybotrys mycotoxins have been blamed for several deaths in Europe.

Public awareness of sick building syndrome has been growing rapidly. Numerous lawsuits have been filed against employers and landlords by employees and tenants who claim they have been affected. Several schools in central Texas have been closed after inspections revealed the presence of large concentrations of harmful molds and fungi.

The Occupational Safety and Health Administration (OSHA) has proposed regulations that would require certain buildings to comply with minimum monitoring and design criteria to ensure indoor air quality. These standards would affect a widely diverse group of different buildings with public access including office buildings, hospitals, shopping centers, and restaurants. One of the most controversial provisions of the proposed rule is a provision that requires building owners and operators to provide design features or management practices that reduce the occupants’ exposure to secondhand cigarette smoke. By all accounts, compliance with these new rules (if they are promulgated as proposed) will be expensive.

Your responsibility
The disclosure requirements on a property owner and a real estate broker about known material defects are well settled under the Real Estate License Act, the Deceptive Trade Practices Act, Fraud in Real Estate Act, and common law. In a nutshell, if an owner or broker knows of a condition in a property that is a material defect or that materially affects the health and safety of an ordinary person, the owner and broker have a duty to disclose the known defect or condition.

This same general principle applies to toxic substances. If a seller and broker know that the property contains a toxic mold or fungus, disclosure is, most likely, required. The residential seller’s disclosure notice asks the seller if the seller is aware of any condition on the property that materially affects the health or safety of an individual. The TAR commercial contract forms and the commercial disclosure notice ask the seller if the seller is aware of any environmental hazards or conditions that affect the property.

Not all mold is harmful
The problem is that many properties have mold or fungus, but the mold or fungus may not be toxic or be harmful. Some plaintiffs have alleged that sellers are required to disclose the presence of any mold, even if the seller has no reason to believe the mold is a health concern, and provide the buyer with a statement that the mold may be harmful. To date, no reported cases have been rendered in Texas holding such a duty exists. The ultimate issue in most of the cases will likely be the seller’s or broker’s knowledge of the presence of such molds or fungus, and whether the seller or broker had a reason to believe that the molds or fungus were harmful.

Ron Walker is director of legal affairs for TAR.

Illustration by Joan Cunningham.

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