Add 20 Mold-Related Requirements for Tenant that Controls Its Space
More and more tenants are suing office building owners, claiming that mold growth in their spaces is causing their employees and visitors to become ill. And tenants are blaming owners for allowing the mold to occur. But if a tenant “controls” its space—that is, the tenant is solely responsible for repairs and maintenance—it's not appropriate to blame the owner for mold and the conditions that could cause it to grow, say Connecticut environmental attorneys Andrew N. Davis and Catherine K. Lin.
To protect yourself from the threat of this type of lawsuit, your lease with a tenant that controls its space should make the tenant responsible for keeping its space free of mold growth and mold-inducing conditions, Davis and Lin say. But most leases don't address this matter. So you and the tenant could end up asking a court to decide who has those responsibilities and who's liable if they're not carried out properly, they warn.
To give yourself this protection, Davis and Lin recommend adding 20 mold-related requirements to your leases. These requirements can be grouped into three categories: monitoring, inspection, and remediation. Plus there's a Model Lease Clause that contains these requirements, which you can adapt and use for your leases (see p. 3).
MONITOR SPACE FOR MOLD
The tenant's effective monitoring of its space can help prevent conditions that will lead to mold growth, says Davis. So make sure your lease includes these monitoring requirements:
* Require Tenant to Regularly Monitor Space
Require the tenant to regularly monitor the space for mold growth and mold-inducing conditions, says Davis. You should make it clear that this means not just actual or suspected mold growth but also actual or suspected water damage, repeated complaints of respiratory ailments or eye irritations by the tenants' employees or any other occupants in the space, and any complaints the tenant is aware of by government agencies about indoor air quality at the space, he explains [Clause, par. a(i)].
Will the tenant have a strong incentive to monitor the space? Yes, says Lin, because monitoring can protect its wallet. If the tenant can prevent mold or mold-inducing conditions, it won't need to take any further steps—such as paying for a mold inspection and remediation, she explains. At the least, by catching problems early, it may be able to keep its remediation costs down and avoid liability for mold-related claims.
Practical Pointer: To learn more about mold, visit the “Mold Resources” page of the U.S. Environmental Protection Agency (EPA) Web site at http://www.epa.gov/iaq/pubs/moldresources.html, Lin advises. Also, see “Control Tenant's Pre-Move-In Inspection for Toxic Mold,” CLLI, Feb. 2002, p. 1, which includes an explanation of the different types of mold.
* Require Tenant to Pay Monitoring Costs
Since the tenant controls the space, require it to pay for all costs of monitoring the space, says Davis [Clause, par. a]. That should reduce the likelihood that the tenant will come after you for payment, he explains.
* Require Notice if Mold or Mold Conditions Are Suspected
Make the tenant promptly notify you in writing if, after monitoring its space, it suspects mold or mold-inducing conditions, says Lin [Clause, par. a(ii)]. This way, you'll know about the problem and can check up on the tenant or other building areas that may be affected by the same mold problem (for example, the common areas adjacent to the tenant's space or an adjacent tenant's space) to ensure that the tenant promptly carries out its inspection and remediation requirements, she explains.
Practical Pointer: Don't commit yourself to sending the tenant a written acknowledgment within a fixed time after you get this notice, says Davis. Because if you make the commitment but forget to send the acknowledgment, he warns, the tenant might argue that you've waived your rights under the lease, so it's no longer required to carry out its inspection and remediation obligations.
PROFESSIONAL MOLD INSPECTION
If tenant's monitoring suggests that mold or mold-inducing conditions may be present, a professional mold inspection will be necessary, says Davis. The inspection's results will confirm or deny their presence, he says. So make sure your lease includes these inspection requirements:
* Require Inspection to Begin Promptly
If the tenant suspects mold or mold-inducing conditions, require the tenant to promptly arrange for an inspection of the space, says Davis [Clause, par. b]. Any delay by the tenant could worsen a potentially hazardous situation, he cautions.
This is also an opportunity to contribute to the scope of the mold inspection, says Davis. You want to be sure the job is done right, but you don't want to appear to be taking control of the mold inspection (or any mold remediation needed), he warns. The space is still under the tenant's control, so any mold problem should remain the tenant's responsibility, he advises.
* Require Inspection Notice
Require the tenant to send you advance written notice of the inspection date and which portion of the space will be inspected, says Lin. Make sure the tenant is required to send its notice at least three business days before the inspection date, she advises [Clause, par. b(i)]. Although you want the tenant to act promptly on its suspicions of mold or mold-inducing conditions, you don't want to be notified of an inspection at the last minute, she explains. You want to be able to keep tabs on the tenant's inspection efforts, she adds.
* Require Tenant to Pay Inspection Costs
Require the tenant to pay all the inspection costs, says Davis [Clause, par. b]. If you don't address these costs in the lease, the tenant may later claim—and a court may agree—that you're responsible for footing the bill for them, he explains.
* Require Tenant to Hire Mold Inspection Specialist
Require the tenant to use only qualified and experienced mold consultants—such as a certified industrial hygienist (CIH) with mold experience—for the inspection, says Davis [Clause, par. b(ii)]. A CIH is certified by the American Board of Industrial Hygienists and is specially trained to conduct indoor air inspections, but not necessarily mold, he says. So make sure the CIH or other consultant you hire has extensive mold experience. Otherwise, the tenant might hire a novice, who might miss a problem, misidentify the type of mold, or damage the space, he warns.
* Require Inspector to Carry Insurance that Protects You
Require the tenant to have the inspector carry “errors and omissions” insurance with appropriate terms and limits, to add you as an additional insured on this policy, and to provide you with evidence of the coverage and a copy of the endorsement naming you as an additional insured, says Lin [Clause, par. b(iii)(A)]. This insurance will protect you if you and the inspector get sued because the inspector didn't adequately perform his or her inspection, she explains.
* Get Right to Limit Times for Inspection
Get the right to limit when the inspection can occur, advises Davis [Clause, par. b]. Because of recent publicity generated by mold lawsuits, you may want to allow a mold inspection only when your building is closed—even if you have to pay for overtime to staff and security costs, he says. This will minimize the risk that existing tenants will draw premature conclusions about mold contamination in the building, he explains.
* Require Discreet and Confidential Inspection
Require the tenant to have the inspection performed discreetly and confidentially, says Lin [Clause, par. b(iii)(B)]. This is important because even if you limit the allowable inspection times, other tenants may be in the building during the inspection, she says. You don't want the inspector to reveal his purpose to other tenants or nonessential personnel or, for example, to appear in conspicuous vehicles or uniforms, says Davis.
* Get Inspection Report
Require the tenant to have the inspector prepare a report after the inspection and promptly give you a copy of it, says Lin [Clause, par. b(iii)(C)]. This way, you'll know if there's mold or a mold-inducing condition in the space, and the extent of it, she explains.
* Require Inspection Report to Be Kept Confidential
Require both the tenant and its inspector to keep the inspection report and its results confidential, says Davis [Clause, par. b(iii)(C)]. The inspection report contains technical information that can be easily misinterpreted by nonprofessionals, especially given the widespread negative publicity generated by recent toxic mold cases. You want the mold remediation plan, if needed, to be developed on the basis of sound scientific, technical, health, and safety considerations—not in an emotionally charged atmosphere, he says. Also, keeping the inspection report confidential reduces the incentive for mold consultants to solicit business from other tenants in your building, he adds.
MOLD REMEDIATION
If the inspection results confirm the presence of mold or a mold-inducing condition in the space, mold remediation will be necessary, says Davis. So make sure your lease includes these requirements for the tenant:
* Require Remediation to Begin Promptly
Require the tenant to promptly hire contractors to remediate any mold or mold-inducing conditions at the space, says Davis [Clause, par. c(i)A]. Any delay by the tenant could cause the situation to worsen. And it could put you and the tenant at risk of getting sued by employees, occupants, or visitors who were exposed to the mold and became ill from it, he warns.
Practical Pointer: If the tenant ever has to do an inspection and it finds only mold that isn't considered toxic, the tenant may argue that it shouldn't have to remediate the mold. But think twice about letting the tenant off the hook, warns Lin. People who are highly sensitive or allergic may have bad reactions to mold species that are considered nontoxic to the rest of us, she explains. Plus, the conditions that allow nontoxic mold to grow could also foster growth of the more toxic varieties of mold, she says.
* Require Remediation Notice
Require the tenant to send you advance written notice of the remediation, says Lin. The notice must tell you when the remediation will start, which portion of the space will be remediated, who will perform the remediation, and when the remediation will end, says Lin. Make sure you get the notice at least three to five days before the remediation's start date, she advises [Clause, par. c(i)(B)]. This will give you some time to prepare your building staff and alert other tenants, since you may have to evacuate some areas of the building during the remediation, explains Lin.
Also, say in your lease that the tenant has the responsibility of notifying its employees, occupants, and visitors of the mold remediation, says Lin [Clause, par. c(i)(C)].
* Require Tenant to Pay Remediation Costs
Make sure the tenant is solely responsible for paying all remediation costs, says Davis [Clause, par. c(i)]. If you don't address this in the lease, the tenant may later claim—and a court may agree—that you're responsible for paying those costs, he warns.
* Require Tenant to Hire Experienced Contractors
Require the tenant to hire experienced mold remediation contractors, says Davis [Clause, par. c(i)(A)]. You want only well-trained and experienced contractors, to reduce the risk of needless damage to the space and a less than thorough job, he warns.
* Require Contractors to Follow Guidelines
Unless there are binding federal, state, or local requirements that apply to your building, require the tenant to make sure its contractors conduct remediation according to EPA guidelines, called “Mold Remediation in Schools and Commercial Buildings.” The guidelines, which were published in March 2001, are considered the most authoritative on the subject, Davis says [Clause, par. c(i)(D)]. If the contractors follow those guidelines, it's easier to prove that the remediation was properly performed. This is particularly important if either the tenant or you are threatened with a mold-exposure lawsuit, he explains.
Practical Pointer: If any guidelines were issued by your local government or any other legally required standards or guidelines apply, require the tenant to make sure the mold remediation contractors also follow those, says Davis [Clause, par. c(i)(D)].
* Get Copy of Remediation Plan
Require the tenant to have its mold remediation contractors prepare a “remediation plan” before the remediation starts, says Davis [Clause, par. c(i)(A)].
The remediation plan should describe the remediation standards and “clearance criteria”—that is, the level of remediation that you and the tenant agree the contractors must reach, says Davis. And the remediation plan should describe the procedures that will be taken to: remediate the mold or mold-inducing conditions; dispose of the moldy materials; and protect workers, tenants, and occupants while the remediation is ongoing, explains Lin. Also, require the tenant to attach a copy of the remediation plan to its remediation notice, says Davis [Clause, par. c(i)(B)]. This way, you'll have time to review its contents with your own expert to see what the remediation involves, he says.
* Get Remediation Report
After a remediation ends, the mold remediation contractors will prepare a “remediation report,” says Davis. This report discusses the results of the remediation, says Davis. Make sure that the tenant is required to give you—or have the contractors give you—a draft of the remediation report so you can comment on it, he says. Also require that you get a copy of the final remediation report, he adds [Clause, par. c(i)(E)].
* Get Right to Inspect Space After Remediation
Get the right to bring your own inspector into the space after you get the final remediation report, says Lin. Your inspector can check the space to confirm that the remediation was done as the report indicates and that it followed any applicable requirements or guidelines, she explains. And if this turns out not to be the case, have the right to require the tenant to fix the problem, she explains [Clause, par. d].
CLLI Sources
Andrew N. Davis, PhD, Esq.: Partner, LeBoeuf, Lamb, Greene & MacRae LLP, Goodwin Sq., 225 Asylum St., 13th Fl., Hartford, CT 06103; (860) 293-3514.
Catherine K. Lin, Esq.: Special Counsel, LeBoeuf, Lamb, Greene & MacRae LLP, Goodwin Sq., 225 Asylum St., 13th Fl., Hartford, CT 06103; (860) 293-3568.
Sidebar
Cover Mold in Other Lease Clauses
Besides adding a clause to your lease to make the tenant responsible for mold and mold-causing conditions, also take a look at your standard lease clauses, say Connecticut environmental attorneys Andrew N. Davis and Catherine K. Lin. Beef up the protection they give you against mold-related lawsuits and other problems. Here are some clauses to review and some changes to make:
ALTERATIONS. Bar the tenant from using materials that are susceptible to mold growth—such as rubber foam—when making alterations, says Davis.
INSURANCE. Add mold coverage to the tenant's insurance obligations, says Lin. This will most likely be a separate policy. If the tenant has adequate coverage, you won't be the only deep pocket who can be the target of a lawsuit.
WAIVER. Require the tenant to waive all rights to sue you for mold-related claims.
INDEMNIFICATION. Require the tenant to indemnify you if you're sued by third parties because of mold in the tenant's space, says Davis. That is, you want the tenant to agree to pay for your defense and not to seek any reimbursement from you for any damages and penalties that may be assessed.
SELF-HELP. Your lease may give you a self-help right—that is, let you enter the space and make repairs the tenant was supposed to make but didn't. If it does, make sure this right includes the right to remediate mold in the space. If it doesn't, make sure you negotiate such a provision for your lease, says Lin.