Checklist for mold-liability concerns

Mold is causing headaches–figuratively and literally–for many Texans. Here are a few steps you can take to minimize your risk.

by Tom Morgan   With all the public discussion and concern about mold recently, you may wonder about sellers’, buyers’, and brokers’ liability for toxic mold found in properties. While there is never an absolute method to avoid potential liability, there are a few risk-reduction steps you can take.

Disclosure a key concern

The basis for potential liability rests largely on the question of disclosure. The Texas Property Code and the Texas Deceptive Trade Practices Act, as well as common law duties, require sellers of real property and real estate licensees to disclose any defect in a property known to the seller or the licensee. Toxic mold in a property in a quantity sufficient to cause harm to an occupant is an item that likely requires disclosure if the seller or the real estate licensee knows about it.

Texas real estate licensees are not required to inspect properties for physical defects or environmental hazards; in fact, only licensed professionals, such as engineers, inspectors, plumbers, and electricians (within their respective disciplines) may inspect properties for fees. Licensees are not likely to know of a defect in a property unless the principal has disclosed the defect to the licensee, or the defect is obvious.

Mold exists in every structure that has ever been built. Therefore, there is no question about whether mold exists in a particular property. In mold damage claims or litigation, courts are likely to focus on whether mold harmful to human beings is present in the property in a sufficient quantity to be harmful to ordinary occupants.

Because real estate licensees do not possess the expertise to judge whether toxic mold is present in a property, you must rely on experts regarding the presence of toxic mold. But presently, the scientific community is divided on the extent and danger of toxic mold. So, one toxic-mold expert may contradict the opinion of another. Regardless, you are better off playing it safe. Your duty is to disclose material information you are aware of regarding toxic mold or its remediation. You are most likely to receive this information from the property owner, but you may also receive such information from prior inspection reports made of the property.

A lack of standards

Presently, there are no promulgated standards as to the level of exposure to toxic mold that is likely to cause harm to an ordinary individual. The scientific community is debating the standards. Equally puzzling is that there are no promulgated inspection standards as to the type and extent of inspections that should be made to a property to determine if toxic mold is present to an extent that it might cause harm to an ordinary individual. There is legislation pending in several states that may lead to the development of such standards in the future.

Insurability may be an issue

Because of the number of claims related to mold caused by accidental water discharge, the insurance industry in Texas has paid a large number of claims involving mold remediation. Insurance companies report that the cost of such claims is devastating. The Texas insurance commissioner is presently working on proposals at the Texas Department of Insurance to address many concerns. A few insurance companies have gone so far as to refuse to write insurance that covers water damage. Others have become very selective as to which properties they will insure.

Until standards are developed and solutions are reached, property owners and buyers may find it, at times, more difficult to obtain acceptable insurance. Industry predictions are that insurance premiums are likely to increase as a result of recent mold claims. Insurability is an issue and concern that seems to be changing week to week at the present time.

Tom Morgan is TAR’s legal analyst.

Photo © BrandX Pictures.

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