The “toxic mold” phenomenon continues, raising new issues and concerns for a growing range of stakeholders. Chief among them are developers, building owners, building material manufacturers, contractors, managing companies, insurers and homeowners associations.

Litigation Context

To appreciate the context within which developers face increasing liability for mold-related claims requires an understanding of mold. Mold is a naturally occurring fungus, found both indoors and outdoors, with more than 20,000 estimated species, many of which are harmless.1 Mold needs three things to survive: warmth, food and moisture. Warmth is readily abundant, especially in hot and humid climates. There are plenty of food sources for mold, including building materials such as wood, carpet, ceiling tiles, drywall, upholstery, wallpaper and sheetrock. Moisture is similarly available in its liquid and gaseous phases.

Liability Concerns and Responsive Measures

In light of conditions conducive for mold growth in the construction context, especially in humid climates, developers are increasingly the subjects of mold-related claims. Common legal theories upon which plaintiffs are basing their claims against developers/owners/builders include violation of the duties to disclose and inspect, negligent maintenance, and defective design, materials and workmanship in the construction of a building. More recently, plaintiffs’ attorneys have expanded the typical theories of relief, asserting claims for intentional inflection of emotional distress, which, if successful, would lead to the recovery of punitive damages. Class-action lawsuits appear to be similarly in vogue, with a South Florida judge recently granting class certification in a suit against a multifamily residential developer of national significance.

In their defense, developers are incorporating various legal protections such as disclosures and disclaimers into purchase-and-sale agreements, condominium declarations and leases. These legal protections acknowledge that mold is a “naturally occurring” substance and that there is no method for completely eliminating mold or mildew. Developers and owners are similarly incorporating risk-shifting provisions and indemnifications in such agreements pursuant to which the tenant/condominium owner/homeowner is responsible for mold-related impacts resulting from tenant negligence, including failure to maintain his or her residence at the recommended temperature and relative humidity; failure to report water intrusion or visible evidence of mold; and failure to take prompt action to prevent or minimize water leaks or penetrations.

Based on recommendations of their architects, condominium developers are adding provisions in the condominium bylaws prohibiting the use of certain building materials such as non-breathable wall coverings on exterior walls, low-permeance paints and vinyl wallpaper. Although the legal effectiveness of some of these measures has yet to be conclusively determined, their use by owners and developers does not appear to have diminished with the increasing media attention and public awareness of fungi-related health concerns.

In addition to legal measures, developers are employing on-site construction techniques principally designed to prevent water damage to drywall and other building materials and thereby to prevent or avoid mold infestation. Such measures consist of the use of tarps or visqueen to protect these materials from rain or pooling, documentation of remedial measures taken once water damage has occurred, and visual inspections for evidence of mold infestation or post-construction water penetration. Developers are also taking proactive steps to minimize future liability by hiring mechanical engineers to evaluate their building plans specifically for conditions leading to mold infestation.

Recent Legislative Trends and Issues

No federal- or state-established requirements specific to mold that establish “safe” exposure levels for the public have been enacted at this date. In the absence of such regulations, a few states are starting to come to the aid of developers, building operators, building managers, mold contractors and homeowners on the legislative front. In 2001, the state of California adopted legislation requiring its health department to determine the feasibility of setting acceptable indoor air exposure limits for mold as the initial step of a phased and comprehensive approach to mold concerns. In their 2003 session, Florida legislators filed three mold-related bills, one of which would have created a task force to investigate toxic mold and its potential hazards. The remaining two bills, if adopted, would have established a regulatory scheme for the licensure or registration of mold-related contractors doing business in the state. Despite apparent public support, none of the bills was enacted.

Uncertainty also exists relative to the duty of the building owner or operator to disclose the existence of the mold. For example, in certain states, a seller is held to a higher degree of disclosure in a residential transaction than in a commercial context; the doctrine of “caveat emptor” (buyer beware) typically governs commercial transactions, absent fraud or misrepresentation. Assuming that a seller/developer is required under common law to disclose all things “material” to its residential buyer/tenant, by which standard does one determine that such a mold problem is no longer material? If fungal growth is remediated by a competent expert, must such prior mold growth (and subsequent remediation) be disclosed? If disclosure is necessary, to whom does it extend? If the source of mold infestation is a compromised air conditioning system in a multi-occupant building, does such disclosure extend to all owners or tenants or simply to the owner or tenant who complained? Neither case law nor legislation has satisfactorily addressed these “disclosure” issues.

In sum, the lack of bright-line regulations governing the presence of mold within indoor environments, as well as the protracted and fact-specific nature of mold-related lawsuits, leaves developers and other affected parties with little guidance on the extent of their responsibility. Until such regulations are adopted, developers will rely upon legal and technical protections as well as the potential for legislative help to minimize their liability.

Kerri L. Barsh is a shareholder in the environmental and land use department of the international law firm Greenberg Traurig.

1-Although scientific research has not been exhaustive or conclusive, fungi such as stachybotrys, aspergillus, cladosporrin and penicillium may be potentially harmful to health, especially when present in large dosages and when susceptible individuals are exposed.


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