“It is just a little mold, nothing to worry about, right?”
As a seasoned property management company with over 21-years of experience, we consider ourselves well equipped to handle almost any situation. We could have never been so wrong. In our society, we have seen the harsh reality of our judicial system, and the lengths people will go in hopes of collecting a considerable payout at any given opportunity. Approximately five years ago, our office received An emergency repair request for a water leak. The tenant noticed water seeping out from the bottom of the wall onto the living room floor from the inside of a bathroom wall. As a standard company procedure, we immediately called out a licensed plumber to inspect the water leak. The plumber immediately scheduled the appointment to go and check the plumbing problem. Once he arrived, he cut into the wall and noticed a cracked PVC plumbing joint inside the wall that had been leaking for some time but was never seen or reported. There was a small area of mold inside the wall. We explained to the tenants that they had to vacate the property and stay at a hotel until we get this issue resolved. They were accommodating and understanding of the situation. So we put them up in a hotel until this issue was corrected. The plumber repaired the problem and recommended having the 37-year old home’s entire plumbing system replaced. The Owner was out of the country and unable to be reached. The next day we received approval, and the plumbing work started immediately.
The entire process of removing all the original piping for the plumbing, to installing new PEX plumbing piping with all sheetrock repairs and new paint was a total of 5-days.
We were pleased we had the problem corrected and home put back together so quickly. We contacted the tenants and gave them the good news. The tenants said they did not want to move back to their house because they said the home was making them sick. We thought this was very odd behavior. They immediately started talking about the kids being ill for several months, and that we needed to continue to pay to keep them in a hotel. We had the home Mold tested, and the Mold test came back negative. The home was clean and safe.
At this point, it was the 15th of the month, and the tenant had not yet paid their rent. The Owner wanted his rent check, and we didn’t have anything to give him. So we sent out a 3-Day Eviction letter. The tenant called our office a couple of days later saying that all of their furnishings were ruined and no longer usable. They wanted their entire Security Deposit returned immediately, even though they repainted the inside of the whole house an awful unauthorized color, left trash, and left home filthy. Against our recommendation, the Owner got involved and said to give it all back to them. It is standard protocol to put our “Waiver and Release” statement on the back of all the Security Deposit Refund checks.
A couple of days later, the tenant came to our office to pick up his Security Deposit check, and when he noticed the “Waiver and Release” stamped on the back of the Security Deposit refund check, he demanded we pay him $16,350 for damages to his furnishings, doctors bills, medicine, and mental anguish. In all of our years managing properties, we could not have ever imagined paying the tenants this amount of money. We, of course, said no, and the tenant stormed out of our office. When he left, I thought to myself that this tenant was different and could be trouble.
We didn’t know what to do. The tenant would not put anything in writing that they have vacated the home, so with advice from our Attorney, we filed for Eviction. Two weeks later we got served a lawsuit for negligence and Deceptive Trade Practice.
But wait, we have insurance coverage, right or do we?
After numerous phone calls to our Insurance company who said we did not have Pollution coverage on our insurance policy and that we would not have coverage. We decided to pay our Attorney to review the entire insurance policy and see if he could find some coverage. Luckily, because we did not return the Tenant’s Security Deposit without the Waiver/Release verbiage, the tenant sued us for the Deceptive Trade Practice.
Five years later, numerous depositions, Mediation, an abundance of phone conversations and emails, a stack of files and correspondence over two feet tall, a $120,000 Legal bill, and a $90,000 Settlement, the case is finally coming to a close.
The moral of the story is a Landlords Rental Dwelling Policy doesn’t typically have Pollution “Mold” coverage, and neither does our Property Management Liability policy. Mold pollution exclusion leaves everyone exposed. If we hadn’t been sued for DTPA, we would have had to claim bankruptcy.
This lawsuit has been a costly lesson. We now require that our E&O Policy cover the necessary Pollution “Mold” coverages for our protection.
Are you protected?
Give RentLife Property Management a call to learn more.
Mark A. Kallus – RMP®, TRPM®, TRLS® and a Member of NARPM for the last 8-years. and
RentLife Property Management in Houston, Texas for over 21-years.
He graduated from The University of Houston with a Bachelors degree in Business Management
He has been an active real estate investor for the last 10-years.