Mold Legislation Q & A

Introduction

In recent years, society has become increasingly aware of the possible health effects related to mold. Though most people are exposed to mold on a daily basis without any evident harm, certain types of mold may, under certain circumstances, cause some people to experience allergic reactions and other health problems.

Responding to these concerns, California adopted two pieces of legislation in 2001 addressing this issue--Senate Bill 732 (Ortiz) and Assembly Bill 284 (Jackson). This legislation provides, among other things, new disclosure requirements for certain sellers and landlords of real property. This Legal Q&A provides an overview of the new legislation, including its specific impact on REALTORS®.

I. Overview of New Mold Legislation

Q: 1. In general, what does Assembly Bill 284 add to the law?

A: Assembly Bill 284 directs the California Research Bureau (a division of the California State Library), in consultation with the California Department of Health Services ("CDHS"), to study the issue of fungal contamination in indoor environments and publish its findings. The Bureau will examine the health effects of exposure to fungi, as well as methods for identifying and remediating fungal contamination. The Bureau is currently scheduled to report its findings by January 1, 2003.

Assembly Bill 284 does not create any specific legal requirements applicable to REALTORS® or their clients.

Q: 2. In general, what does Senate Bill 732 add to the law?

A: Senate Bill 732, which implements the new Toxic Mold Protection Act of 2001, has several provisions. First, it directs the CDHS to adopt permissible exposure limits to mold in indoor environments, if feasible. The CDHS is currently scheduled to report its progress in adopting exposure limits to the legislature by July 1, 2003. Along with permissible exposure limits, the CDHS must adopt standards for assessing the health risks posed by mold in indoor environments, guidelines for identifying indoor mold, and remediation guidelines addressing the removal of both indoor mold and its underlying causes. Again, the

CDHS must report its progress in developing these standards and guidelines by July 1, 2003.

Secondly, Senate Bill 732 creates various mold-related disclosure requirements for certain sellers and lessors of real property. For example, this legislation modifies the Real Estate Transfer Disclosure Statement required in most transfers of residential one-to-four-unit properties to specifically prompt sellers to disclose mold which is known to be present in the subject property.

Finally, Senate Bill 732 requires certain commercial and industrial landlords to take remedial action against mold or water intrusion.

The balance of this Legal Q&A focuses on the requirements of Senate Bill 732. For ease of reference, these requirements have been categorized as follows:

Citations to the California Health & Safety Code will be made using the abbreviation "H&S" followed by the applicable section number.

A. Residential Sellers

Q: 3. What is the new disclosure requirement for sellers of one to four residential units?

A: The new law amends the Real Estate Transfer Disclosure Statement (TDS) to specifically include the word "mold." Thus, effective January 1, 2002, sellers complying with the TDS requirement must disclose, in section IIC1 of the form, whether they are "aware of any . . . substances, materials or products which may be an environmental hazard such as, but not limited to, asbestos, formaldehyde, radon gas, lead-based paint, mold, fuel or chemical storage tanks . . ." (emphasis added). (California Civil Code Section 1102.6.)

The TDS requirements generally apply, with certain exceptions, to transferors of real property and stock cooperatives improved with or consisting of one to four dwelling units. (California Civil Code Section 1102.)

Q: 4. In completing the TDS form, what is the correct answer if a seller knows there is mold in the property, but does not know if it is an environmental hazard?

A: The TDS asks if the seller is "aware of any . . . substances . . . which may be an environmental hazard . . ." (emphasis added). Thus, if the seller is aware of mold in his or her property, the seller should generally answer "Yes" since mold "may be" an environmental hazard. However, to avoid unnecessary confusion, the seller can use the explanation section of the TDS to clarify that he or she does not know whether the mold is an environmental hazard.

Q: 5. May a seller of one to four residential units, or his or her real estate agent, use the new TDS with the mold language before the January 1, 2002 effective date?

A: It is a good idea, but not a legal requirement, for a seller or real estate agent to use the new TDS even before the January 1, 2002 effective date.

Q: 6. Are there any new requirements for sellers of five or more residential units?

A: The new law does not include any new requirements for sellers of residential properties with five or more units, but see Section IB below for requirements affecting all residential landlords.

Q: 7. Are there any other precautions any seller (or landlord or real estate agent), regardless of the number of units in the property, may take to reduce any potential liability for mold in the property?

A: Yes. Regardless of the requirements of the new law, actual knowledge of mold in the property is probably a material fact that should be disclosed. In addition, it may be helpful (even if not required), for residential, commercial, and industrial sellers, landlords, and their real estate agents to give to their buyers, tenants, clients, and other consumers, where applicable, various publications and forms addressing mold and its potential health effects. These publications and forms include, but are not limited to, the following:

The Environmental Hazards booklet (see Question 8); and
C.A.R.’s Buyer’s Inspection Advisory (see Question 9)

Q: 8. What is the "Environmental Hazards" booklet?

A: It is a consumer information booklet entitled Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants. It contains information about various environmental hazards, including a new chapter on mold.

It is not legally mandated, but highly recommended for sellers and their real estate agents to give the Environmental Hazards booklet to their buyers. If given, the information will be deemed adequate to inform the buyer regarding common environmental hazards, as described in the booklet. Providing the booklet, however, does not protect a seller or agent from failing to disclose any known environmental hazards affecting the property. (California Civil Code Section 2079.7.) Landlords are also encouraged to give this booklet to their tenants.

For booklets without the mold chapter, REALTORS® can download the mold chapter from www.members.car.org/legal/realegal/mold.doc, and insert it into existing Environmental Hazards booklets for use in current transactions. Please note that C.A.R. publishes a combined booklet, which incorporates the Environmental Hazards booklet and two other booklets entitled Protect Your Family From Lead in Your Home and The Homeowners Guide to Earthquake Safety. While use of the environmental hazards section of the combined booklet is optional under the law, the other two sections of the combined booklet are mandatory disclosures in certain types of transactions.

Q: 9. What is the "Buyer’s Inspection Advisory"?

A: C.A.R. publishes a standard form entitled Buyer’s Inspection Advisory (Standard Form BIA) which states that agents have no expertise in hazardous substances, and advises buyers to inspect the property they are purchasing for, among other things, environmental hazards, including mold. The Buyer’s Inspection Advisory is a recommended, but not legally mandated, form.

The Buyer’s Inspection Advisory is attached to purchase agreements published by C.A.R., but can also be purchased separately. To ensure inclusion of the mold advisory, be sure the Buyer’s Inspection Advisory has a print date of August 2001 or later.

B. Residential Landlords

Q: 10. What are the new disclosure requirements for residential landlords?

A: Residential landlords must, among other things, provide prospective tenants with consumer-oriented booklets (which are not yet available) addressing the potential health risks associated with mold exposure. (H&S 26148(a).) These booklets must be given to prospective tenants before entering into a rental or lease agreement. (H&S 26148(b).) This requirement applies whether or not the CDHS adopts permissible mold exposure limits. (Additional disclosure requirements may apply if and when the CDHS adopts permissible exposure limits. See Question 11.)

This booklet requirement does not come into effect until the first January 1 or July 1 that occurs at least six months after the CDHS approves the booklet. (H&S 26148(c).) It is not yet known whether the chapter on mold contained in the Environmental Hazards booklet distributed in many real estate transactions (see Question 8) will satisfy this requirement.

Q: 11. What are the new disclosure requirements for residential landlords if the CDHS adopts permissible mold exposure limits?

A: If the CDHS adopts permissible mold exposure limits, then residential landlords must disclose in writing to current and prospective tenants any knowledge, or reasonable cause to believe, that mold is present, and either exceeds permissible exposure limits or poses a health threat. This disclosure is required whether the mold is visible, invisible, or hidden. The landlord is exempt from this disclosure requirement if the mold is remediated according to CDHS guidelines (to be established). (H&S 26147.)

The CDHS will develop a disclosure form for residential landlords to use when disclosing the presence of mold. The CDHS must also determine the penalties, if any, for failure to disclose. (H&S 26154.) This disclosure requirement does not come into effect until the first January 1 or July 1 that occurs at least six months after the CDHS adopts permissible exposure limits and other guidelines. (H&S 26147(e).)

Q:12. When do residential landlords have to furnish the disclosures discussed in Question 11?

A: If the CDHS adopts permissible exposure limits, residential landlords must provide written disclosures regarding the presence of mold to prospective tenants before entering into a rental or lease agreement, and to current tenants in affected units as soon as is reasonably practical. (H&S 26147(c).)

Q: 13. Are residential landlords required to conduct tests to determine the exposure level of mold?

A: No. Residential landlords are not required to conduct air or surface tests of units or buildings to determine whether the presence of mold exceeds the permissible exposure limits to be established by the CDHS. (H&S 26147(b).)

C. Commercial and Industrial Sellers

Q: 14. What is the new disclosure requirement for sellers of commercial or industrial property?

A: If the CDHS adopts permissible mold exposure limits, then sellers and transferors of commercial or industrial property must, as soon as practicable before the transfer of title, disclose in writing any knowledge of the presence of mold that affects the subject building, and either exceeds permissible exposure limits or poses a health threat. This disclosure is required whether the mold is visible, invisible, or hidden.

The seller is exempt from this disclosure requirement if the mold is remediated according to CDHS guidelines (to be established). This disclosure requirement does not come into effect until the first January 1 or July 1 that occurs at least six months after the CDHS adopts permissible exposure limits and other guidelines. (H&S 26140.)

Q: 15. To what extent are sellers responsible for the information on mold provided in accordance with this law?

A: Sellers exercising ordinary care will not be liable for any error, inaccuracy, or omission of information delivered under this law that is:

Not within their personal knowledge;
Based on information provided by public agencies; or
Based on information provided by other persons providing a report or expert opinion.
(H&S 26153.)

Q:16. Are sellers of commercial or industrial property required to conduct tests to determine the exposure level of mold?

A: Probably not. California Health & Safety Code Section 26140, which addresses the disclosure requirements of commercial and industrial real property sellers, states that commercial and industrial landlords need not test the exposure level of units or buildings. The reference to landlords was probably an error, and most likely was intended to reference sellers. (H&S 26140.)

Q:17. Are there additional precautions a seller of commercial or industrial property may take to reduce any potential liability for mold in the property?

A: Yes, see Questions 7 to 9.

D. Commercial and Industrial Landlords

Q:18. What is the new disclosure requirement for landlords of commercial or industrial property?

A: If the CDHS adopts permissible mold exposure limits, then landlords of commercial or industrial property must disclose in writing to prospective and current tenants any knowledge of the presence of mold that affects the building, and either exceeds permissible exposure limits or poses a health threat. The disclosure is required whether the mold is visible, invisible, or hidden.

The landlord is exempt from this disclosure requirement if the mold is remediated according to CDHS guidelines (to be established). This disclosure requirement does not come into effect until the first January 1 or July 1 that occurs at least six months after the CDHS adopts permissible exposure limits and other guidelines. (H&S 26141.)

Q:19. When do commercial and industrial landlords have to furnish the disclosures discussed in Question 18?

A: If the CDHS adopts permissible exposure limits, commercial and industrial landlords must provide written disclosures regarding the presence of mold to prospective tenants as soon as practicable before entering into a rental or lease agreement, and to current tenants in affected units as soon as is reasonably practical. (H&S 26141(b).)

Q:20. Are commercial or industrial landlords required to conduct tests to determine the exposure level of mold?

A: No. Commercial and industrial landlords are not required to conduct air or surface tests of units or buildings to determine whether the presence of mold exceeds the permissible exposure limits to be established by the CDHS. (H&S 26141(d).)

Q:21. Are commercial or industrial landlords required to take remedial actions against any known presence of mold?

A: Yes. Subject to one exemption (see Question 23), commercial and industrial landlords with knowledge or notice that mold is present in the subject building, or its heating, ventilating, or air conditioning systems, or that there is a condition of chronic water intrusion or flood, must, within a reasonable time, assess the presence or likelihood of mold, and take any necessary remedial action. (H&S 26143.) This requirement applies whether or not the CHDS adopts permissive exposure limits.

Q:22. Must a commercial or industrial tenant take any steps to assist the landlord in taking remedial actions against mold?

A: Yes. Any tenant of a commercial or industrial property who knows that mold is present in the building, or its heating, ventilating, or air-conditioning systems, or that there is a condition of chronic water intrusion or flood, must, within a reasonable time, inform the landlord of this knowledge in writing. The tenant must also make the property available to the landlord or his or her agents for proper assessment or remedial action as soon as reasonably practicable if the landlord is responsible for maintaining the property. (H&S 26142.)

Q:23. What is the exemption from a commercial or industrial landlord’s duty to take remedial actions against mold?

A: A commercial or industrial landlord is exempt if the tenant is contractually responsible for maintaining the property, including undertaking any remedial measures. If the tenant has this responsibility, then the tenant must give the landlord written notice of the presence of mold or chronic water intrusion, and correct the condition. (H&S 26144-45.)

II. Real Estate Practitioners

Q:24. Does the new law impose any new inspection or disclosure duties on real estate agents?

A: No. Nothing in the new law shall be construed to change the existing inspection and disclosure duties of a real estate broker or salesperson. (H&S 26150(b).)

Q:25. What are a real estate agent’s duties regarding mold?

A: As discussed in the answer to Question 24, the new law does not create any new inspection or disclosure duties for real estate agents. However, under existing law, real estate agents may have several duties related to mold.

First, for the sale of residential real property of one to four units or manufactured homes, real estate agents must conduct a reasonably competent and diligent visual inspection of the property, and disclose to the buyer all material facts affecting the value or desirability of the property that such an investigation would reveal. The "Agent’s Inspection Disclosure" sections of the TDS may be used to make these disclosures. (See Questions 3 through 5 for additional information regarding the TDS.)

Secondly, for transactions involving other types of property, there is no statutory requirement for real estate agents to conduct a visual inspection. However, regardless of the nature of the transaction, real estate agents generally have a duty to disclose known material facts that affect the value or desirability of the subject property. Because mold can constitute a health hazard, it may be deemed a material fact, and as such, should probably be disclosed in most cases.

Q:26. To what extent are real estate agents responsible for the information provided under the Toxic Mold Protection Act?

A: Real estate agents exercising ordinary care are not liable for any error, inaccuracy, or omission of information delivered under this law that is:

Not within their personal knowledge;
Based on information provided by public agencies; or
Based on information provided by other persons providing a report or expert opinion.
(H&S 26153.)

Q:27. Are there any other precautions real estate agents and their clients may take to reduce any potential liability for mold in the property?

A: Yes, see Questions 7 to 9.

Q:28. How can REALTORS® get updates on mold legislation, including updates on CDHS’s progress in adopting permissible mold exposure limits?

A: A good way for REALTORS® to stay informed is to sign up for C.A.R.’s Realegal™ legal update service which electronically disseminates late-breaking news to members. To sign up, simply e-mail C.A.R. at realegal@car.org and give us your e-mail address. REALTORS® can also obtain Legal Updates from C.A.R. Online at http://www.car.org, or by calling C.A.R.’s Member Legal Hotline (see Question 30).

Q:29. Where can I get more information about mold, such as how to identify its presence?

A: The Environmental Hazards booklet (see Question 8) provides information about mold, including ways to identify it. Other sources of information on mold include the following:

California Department of Health Services (CDHS)
Publication: Mold in My Home: What Do I Do? (also available in Spanish)
Telephone: 916.445.4171
www.dhs.ca.gov

CDHS’s Indoor Air Quality Section
IAQ Assistance Line: 510.540.2476
www.cal-iaq.org

CDHS’s Environmental Health Investigation Branch
Telephone: 510.622.4500
www.dhs.ca.gov/ehib/

U. S. Environmental Protection Agency (EPA)
EPA Indoor Air Quality Information
Clearinghouse Line: 1.800.438.4318 or 703.356.4020
www.epa.gov

Centers for Disease Control and Prevention (CDC)
Public Inquiries: 1.800.311.3435 or 404.639.3534
www.cdc.gov

CDC’s National Center for Environmental Health (NCEH)
Health Line: 1.888.232.6789
www.cdc.gov/nceh

Q: 30. Where can I obtain further information?

A: The Limited Liability Company Unit of the Secretary of State can be reached by letter or telephone, for further information, as follows:
Limited Liability Companies
Post Office Box 944228
Sacramento, California 94244-2280
Telephone: (916) 653-3795

Additionally you can visit the Secretary of State's website at http://www.ss.ca.gov.

The full text of this and other legal Q&As, Legal Briefs, and Memoranda are available without charge on CARNET and are distributed automatically to RMI (Risk Management Institute)subscribers and local Associations/Boards of REALTORS(R). A copy may also be obtained through the Member Legal Hotline.

Readers who require specific advice should review the facts with an attorney. C.A.R. members with questions may contact the Member Legal Hotline at (213) 739-8282, Monday through Friday, 10:00 A.M. to 6:00 P.M. C.A.R. members who are broker-owners, office managers, or Designated REALTORS(R)may contact the Member Legal Hotline at (213) 739-8350, Monday through Friday, 9:00 A.M. to 7:00 P.M. Letters concerning this topic may be addressed to:

California Association of REALTORS(R)
Member Legal Services
525 South Virgil Avenue
Los Angeles, California 90020

The information contained herein is believed accurate as of December 1, 2000. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney