SF Apartment : November 2016

FEATURE

Break the Mold

by Terrence Jones

“Mold” is a word that has always struck fear in the hearts of apartment building owners in San Francisco. Not only can breathing toxic, spore-filled air cause mild to severe health problems, but it can also be very expensive to remove completely. We’ve all heard stories of mold removal costing thousands of dollars, at the hands of specialists who show up in hazmat suits looking like actors from a science fiction movie about some outbreak of the super-plague. These costs have always fallen to the owner’s responsibility.

Today, building owners can breathe a little easier with the advent of California Senate Bill 655 (D-Mitchell), which was signed into law on Oct. 9, 2015 by Governor Jerry Brown. This bill states that tenants are now required to share in the responsibility for basic housekeeping and ventilation of their units.

In the past, according to Elizabeth Hurwitz, a rent-control specialist attorney at Utrecht & Lenvin, LLP, any issues of mold in a unit were the sole responsibility of the landlord—even if the landlord was unaware of the problem. In eviction cases for non-payment of rent, the defaulting tenant may make claims about the habitability of the unit; by law, if a unit is found to be uninhabitable, the amount of rent owed by the tenant can be reduced. However, there have been many instances where a tenant has raised issues that were unknown to the landlord.

Mold is a common issue brought up by tenants, particularly because it carries a stigma of a dirty and unsafe environment. When mold is present in a unit, often it is due to improper ventilation in the bathroom or inadequate cleaning of the unit, both of which are controlled by the tenant. Despite this, the landlord has always been considered responsible for the cleanup. In cases where no mold is found, the landlord is still responsible for expensive testing to prove the unit is free from spores for current and future tenants. Even if the landlord provides bleach or other cleaning agents and the tenant does not use them, the landlord is responsible for the clean-up and a tenant could be awarded a reduced rent based on this claim.

The California Apartment Association (CAA) believes the protections added to the law will stop the baseless types of litigation and eviction-delay tactics that tenants and unscrupulous attorneys use today by citing the broad “nuisance” provisions of the existing health and safety law.

SB 655 offers property owners a number of protections from bogus claims of mold contamination including:

Visibility: The mold growth must be visible. Landlords can no longer be subjected to expensive and time-consuming air tests that tenants and their attorneys attempt to use to delay evictions and avoid the payment of rent. Elizabeth Hurwitz gives this advice to her clients: “If you do make entry into a tenant’s unit to make repairs, be sure to take photographs of the bathroom and the kitchen. This can refute a later claim of mold in the unit.”

Confirmation: A health officer or code enforcement officer must determine if any mold is at a level that endangers the life, limb, health, property, safety, or welfare of the public or the occupants. Last-minute tenant declarations that the mold exists are not enough to confirm a claim.

Location: The law excludes from the previous substandard code any mold that is minor and found on surfaces that already accumulate moisture as part of their properly functioning and intended use—such as bathroom showers and window sills.

Notification: The owner must receive written notice that the mold exists in order to be subject to any obligations under the law. According to Hurwitz, “It is wise to avoid the verbal trap. If a tenant attempts to give you oral notice of mold, ask that they give it in writing. This can undermine later claims from the tenant that you were told but took no action. If you always require complaints to be in writing, you can undercut the ‘he-said, she-said’ argument.”

Responsibility: The owner is not responsible for the cost of mold cleanup if the tenant caused the situation by failing to properly clean the unit or failing to use electrical fixtures, like bathroom fans, to keep mold out.

Accessibility: The law makes it clear that the landlord has the right to enter the property to make repairs and clean up any reported mold. Sometimes, a landlord may receive notice, but the tenant refuses to allow the owner in to address the issue. Hurwitz offers important advice: “In this situation, you should always document the attempt at entry and the corresponding refusal by the tenant. This can be very important if habitability issues are claimed during an eviction. A tenant cannot refuse entry to the landlord to make repairs and then use the failure to make repairs as a defense to an eviction.”

So how does this impact the San Francisco rent-controlled apartment owner? As usual, in real estate, the answer is never simple. Here are several scenarios that demonstrate different financial outcomes after mold is discovered in a rental property.

Scenario Number 1
A building owner has discovered an early-stage mold problem in one or more of the units during an annual inspection (often required to comply with insurance coverage). In this case, there is a good chance of minimizing the financial burden of the owner and also of allowing an opportunity for the tenant to take some responsibility for their living environment.

If mold is found in its early stages, it can be remediated with a simple bleach-and-water cleaning solution, which kills it. After the mold has been cleaned up, the owner provides instruction for the tenant on how to properly ventilate the unit to eliminate any high-moisture situation that could create a fertile ground for mold to prosper. 

In this situation, the owner is able to minimize the cost and document any housekeeping issues the tenant might have.

The cost to resolve this scenario is approximately $500.

Scenario Number 2
A client of ours was attempting to evict a tenant for non-payment of rent. The tenant claimed there was mold in the unit sufficient to create a habitability defense to the eviction.

The landlord was forced to hire a company to test for mold in the unit. The tests showed that there was no mold in sufficient quantities to present a danger to 
the health and safety of the tenant, but many weeks were lost in litigation and the landlord incurred costs to defeat this meritless defense.

The total cost to the landlord was approximately $1,650.

Scenario Number 3
In this final cautionary tale, a client recently had a front gate that was not latching properly at her building. A tenant complained about the situation, but the owner did not communicate well with the tenant about the progress made toward the repair. The owner hired two contractors to fix the situation over a period of three weeks. Unfortunately, the tenant thought nothing was being done to resolve the situation and felt the issue was not being taken seriously by the owner, so they called in a Department of Building Inspection complaint. An inspector came out to the building and did a detailed inspection of the entire building. The inspector found multiple issues and a Notice of Violation was issued.

As part of the complaint process, the inspector inspected the tenant’s unit and found mold in the bathroom. At this point, the owner could not move the responsibility of the mold to the tenant. Her only option was to hire a mold remediation specialist to remove the problem. The specialist took three days to thoroughly remove the mold, and the tenant was not allowed to be in the unit during cleanup. The owner had to pay for a hotel room for the tenant until the unit was ready for occupation. The cleanup was extensive and included installation of a HEPA filter system, removal of sheetrock, reinstallation of sheetrock, repainting of the bathroom, and post-construction testing.

The result was a bill to the owner of approximately $6,000.

Clearly, scenario number 1 is the preferred situation for an owner faced with mold issues in one or more of their units. It is less adversarial and more of a partnership between the landlord and the tenant. Each party accepts responsibility because they both stand to gain—the tenant knows their apartment is well maintained and a healthy environment, and the landlord knows that the unit will continue to be a good investment.

We interviewed Meridian Management Company, one of the larger building managers in San Francisco. They explained their procedure for addressing mold issues.

The first level of outreach is to send a letter to tenants along with their annual rent increase on the subject of mold and mildew. The letter includes a paragraph noting what mold and mildew is and how it can accumulate and grow in a high moisture environment. They note, “The best way to avoid problems is to prevent excessive moisture buildup in your home,” and “there are several measures to prevent excessive moisture buildup . . .through proper ventilation…use of windows…use of fans…and wiping down moist surfaces.” At the end of the letter they ask tenants to “promptly call your resident manager to report any signs of water leakage or signs of excessive mold or mildew growth.”

The building manager has a specific procedure to follow when notified about a mold problem. Those steps are:

• Note in the daily log the time the tenant contacted the manager about the issue and by what method (email, phone call, letter).
• Assess the situation. Where is the mold and how big an area does it cover? About how long has it been there and what may be the cause of the problem? 
• Identify the moisture source.
• If this is a housekeeping issue, discuss it with the tenant and refer to SB655. 
• If this is not the tenant’s responsibility and needs to be completed by the management, contact your supervisor.
• By giving tenants a detailed notice and having a procedure for onsite managers in place, Meridian professionally and legally deals with shifting the responsibility to its cause within the bounds of SB655.

Legal and management professionals in the apartment rental business in San Francisco are happy about the new bill and its changes in regard to their responsibilities when it comes to mold problems. But it is still very important that San Francisco landlords have clear procedures in place for written notice, treatment, and cleanup, if needed, to avoid costly mistakes around mold.

Terrence Jones is a senior broker associate with TRI Commercial and specializes in the marketing and sale of investment properties. His business specialty is San Francisco rent controlled apartments. He has extensive experience with properties with special circumstances. He can be contacted at 415-786-2216 or by email at [email protected].