Commercial properties have rules and regulations on safety that can come from the local, state, or even federal level. Maintaining compliance with these requirements is a key component of avoiding liability lawsuits as well as potential fees and fines.

While things, like managing ice in winter, general safety, ADA compliance, electrical codes and making sure food service outlets meet specific standards, are certainly important. Yet there are a great many other things that can affect a commercial property’s liability.

If you own, manage, or lease a commercial property, you need to stay on top of any and all liability issues. This includes a problem like the presence of toxic mold and the costly litigation that might result from it.

Indoor Mold Contamination

The presence of mold in any indoor environment can have a significant impact on the health of tenants, employees, and guests. At the same time mold, fungi, and other microbes exist in nature. These things have spent eons evolving to be as tenacious as they are pervasive. When they become established in an indoor environment, mold’s opportunistic nature can allow it to quickly thrive.

Mold propagates itself by releasing spores into the air. When these spores land in a moist, warm environment they can set down microscopic roots and start to thrive. This, in turn, encourages mold to continue to release even more spores into the air. Many of these, including mycotoxins which can affect respiratory health and potentially lead to chronic inflammation conditions.

Mold Regulations

In 1994 the Occupational Safety and Health Administration recognizes the threat posed by the presence of mold in indoor environments when they proposed standards for addressing general indoor air quality in the workplace. This included limiting the presence of toxigenic fungi and mycotoxins. This brought the issue to the attention of lawmakers and heightened the public’s awareness of toxic mold.

This spurned a vigorous debate and comprehensive research into the effect of mold spores in an indoor environment. In 2001 the State of California ratified its Toxic Mold Protection Act, which created a task force responsible for developing standards for the permissible level of mold as well as assessing the health threats it poses.

Mold Clauses In Commercial Property Leases And Purchase Agreements

Public awareness of the impact of toxic mold has continued to grow. Media exposure and high-profile litigation have also caught the attention of litigators, underwriters, and commercial property realtors. This has driven many organizations to include some form of mold clause in lease and purchase agreements.

In many of these instances, risk assessment is often required for preventing mold problems. Potential tenants and commercial property purchasers are often advised to request an assessment for toxic mold before agreeing or closing on a property.

Commercial property owners are also advised to perform periodic assessments for toxic mold risk and overall evaluation of indoor air quality. Failing to do so, could leave the property owner vulnerable to liability litigation.

The Mold Assessment Process

A mold assessment is often performed by an independent outside party who specializes in air quality assessments. While there may be some negotiation involved, most of these assessment clauses call for the seller to pay the initial expense of an assessment. If a mold problem is identified, contractual provisions may be included to reflect the cost to remediate the mold. This might also include a confidentiality clause

On Going Contractual Responsibility

Property sellers who take responsibility for assessing and remediating the presence of mold in a property also need to define when and where their liability ends. With some properties, the threat of mold redeveloping is very real. This might be related to the characteristics of the roof, the surrounding outdoor environment, flood risk, older pipes, and infrastructure as well as structural characteristics.

Once the mold has been professionally remediated the seller will likely include a clause noting that they will not be held responsible for future mold infestation issues. In the case of a long-term lease, there might be provisions where the property owner is responsible for periodic assessments, and remediation costs. At the same time, the tenant may also be required to take steps to help prevent mold problems, as well as reporting any concerns to the property owner in a timely manner.

The Importance Of Mold Prevention

Once mold establishes itself in an indoor environment it can be very costly to remediate. Professional measures are always required to eliminate active mold issues as well as setting up measures to prevent lingering airborne spores. The longer mold goes without effective remediation the stronger its presence becomes.

Taking proactive steps to prevent the presence of mold and set in place policies and procedures for quickly identifying or reporting a problem will go a long way toward preventing a major problem. In some cases, mold can spread from one indoor location to another in less than 24-hours. In a multi-tenant situation, this means that a mold problem could start in one unit and then quickly spread to others.

These days many commercial property owners who are aware of the threat of toxic mold will set up policies in any lease contract. With many of these clauses, the owner will take responsibility for the cost of mold assessments and include incentive practices for tenants who are diligent about adhering to mold prevention, and reporting policies.

Many of these contracts also include some provision on how mold remediation is handled. This might include liability clauses for a tenant who is remiss in their mold prevention and reporting. In a case where a tenant is negligent, they may assume all the financial responsibility for professional remediation.

On the other end of the spectrum, if a fault in the building is found to be the direct cause of the mold issue, the owner may be responsible for the total cost of professional remediation. This also includes empty units that may develop a mold problem that goes unnoticed.