Mold problems are injecting an element of chance into realestate deals, according to a recent survey of builders and realestate lenders conducted by the Environmental Assurance Group,based in Hartford, Conn.

When asked whether they believe that mold can affect the valueof a real estate transaction, 99 percent of respondents said yes.Of those surveyed, 60 percent reported hearing of parties who hadbacked out of real estate transactions due to the fear that moldproblems might exist. Possible mold liability involving investmentproperties was a concern among 76 percent of executives. Inaddition, respondents familiar with specific mold-related incidentssaid that it would have taken an average of more than $300,000 tofix the problems.

Developers, architects, construction executives, and mortgagelenders are taking precautions to protect themselves because of themold exclusions recently written by the insurance industry onproperty and business policies, according to EAG. “Our latestsurvey shows that mold fear is growing exponentially among themajor stakeholders in the real estate business in a post-insuranceworld,” said Charles Perry, a principal with the firm. “It's clearthat, without the emergence of a new risk mitigation method, doinga real estate deal nowadays is just a roll of the dice, which iswhy the insurance industry bowed out.”

Nationwide, mold often is excluded on property and casualtycoverage, business risk insurance, and directors & officerspolicies. “Who is going to pay for mold-related cleanup andrebuilding on a contaminated hotel, condo, affordable housingcomplex, or hospital/health-care facility?” asked Perry. “Ifproperty owners decide to default, how much is the mold-ridden loancollateral worth? From a financial standpoint, we're in new andterrifying territory.”

The building and lending industries cannot seem to find aconsensus on dealing with mold risk mitigation, according to EAG.“Some still hold out hope that a cure will be found,” said Perry.“Unfortunately, mold cannot simply be scraped away like asbestos orlead paint. As more stakeholders acknowledge the scientific fact ofmold's resilience, we will see a groundswell begin to form for anew mold prevention protocol, which focuses on removing thepossibility of mold entering a structure.”

When asked about mold prevention programs for new construction,96 percent of those surveyed said that they would favor a programthat included a new construction protocol, the use ofmold-resistant building materials, and inspection regimes withsign-offs or certifications. The biggest factor in a decision toapprove a mold prevention protocol would be a preferred mortgagerate, according to 59 percent of the respondents. Having moldincluded in their insurance coverage (49 percent), positive effectson resale ability and price (47 percent), and reductions ininsurance premium (39 percent) also rated highly as influentialfactors for supporting mold prevention protocols.