Lenders Called to Arms to Diminish Mold
Problem
November 10, 2004, Commercial Property News
By Suzann D. Silverman, Editor-in-Chief
Like mold itself, its effect on real estate just will not go
away. While a federal study in late May found no evidence it causes the
types of health problems alleged in lawsuits in the past few years and a
recent court ruling found in favor of Equity Residential, the property
owner, a new survey by the Environmental Assurance Group found developers
and lenders still concerned--and for good reason.
"If people are focused on the health issues, I don't think it's an
appropriate place to be focused. The real issue is what is my property
value's health," said Charles Perry, founder of the Environmental Assurance
Group and a member of the Mortgage Bankers Association's mold task force.
Last year, he cited, third-party settlements averaged $1.7 million. And the
issue can be even bigger than such claims and cleanup costs, which
themselves average $11 million (first-party settlements last year ran in the
range of half a million dollars). Because mold can be impossible to
completely eradicate, "I know people who have handed over the keys and the
lender's in a default situation and the lender won't even take the property
back," he said.
Indeed, according to the survey's findings, 75 percent of the 40 lenders and
developers polled have heard of a party backing out of a deal because of
mold problems, and more than half listed mold by far as the type of
environmental contamination they fear most. In addition, more than half knew
of mold problems that caused a revaluing of a transaction.
Yet the situation can be easily improved, Perry said. "We're doing nothing
to assess this, especially during new construction," he noted. But close to
90 percent of the risk of mold infiltration can be avoided by doing an
assessment and ensuring use of mold-resistant building products during new
construction and redevelopment.
If lenders were to demand such steps, he predicted, the insurance companies
would once again cover mold under their property and casualty provisions
within two years.
[Home] [Build-Water-Damage-Business] [Mold-Insurance Coverage] [CLUE-Property-Blacklist] [Loans-Insurance-Mold-Problems] |
