Avoiding Litigation: Grading & Drainage & Mold

Grading and drainage, or moisture related problems, are the leading cause of real estate litigation, and usually result in the most expensive lawsuits. And wherever water flows, or drips and gathers, mold is bound to follow! Let’s talk about that first. Mold has been around since the beginning of recorded time and is actually essential to the life process, but don’t expect attorneys to believe that. Most of it is relatively benign, and its threat to humans has been greatly exaggerated in the media, for reasons of publicity. Fear sells, which has been a great asset to attorneys and publicity seekers! But Dr. Ronald E. Gots, who has the authority to speak about environmental toxicology, has courageously attempted to set the record straight in his carefully documented article entitled “Correcting Mold Misinformation,” in which he confirms: “major misinformation has been presented to the public.” He goes on to say: “Those groups that benefit most from continued distribution of such misinformation have little scientific or medically credible support for the current level of distress to which they contribute.” Regardless of the truth, inspectors should continue to be vigilant. I believe that we have the responsibility to educate our clients, and every report should include some information about mold, which in turn should go a long way in helping us to avoid litigation. I even go so far as to recommend air-quality testing and duct cleaning, as a prudent investment in environmental hygiene. But let’s talk about grading and drainage.

Water is destructive. Without it even expansive soils are powerless. More destruction has probably resulted from water, and particularly in consort with expansive soils, than that from most natural disasters. It can flow through fissures in the soil, rise under barometric pressure or capillary action, and even find a path through solid surfaces, and few structures are immune to its power. Unless it is provided with a channel around a structure it will generally find a way inside it, and when it does disputes and litigation are bound to follow. Most lots are graded in one way or another before a house is built, but few of them are ideal, and moisture intrusion usually remains a possibility. It may take several days of rain, or even a flash flood, for moisture intrusion to occur, but that rare occurrence wouldn’t absolve you of the responsibility of warning your clients about the potential and, having failed to do so, you are likely to be charged with negligence, not breach of contract but negligence, and maybe even fraud! Let me illustrate how this could happen by relating a story from the trenches that has a happy ending.

An inspector had finished evaluating a vacant and recently renovated house, and found nothing of any consequence to report. The house was situated on a flat and level lot and, although the house had been renovated, no improvements had been made to the outside. There was no landscaping, no gutters or area drains, and no hard surfaces other than a small patio slab. There were some small shrinkage cracks in the stem walls of the foundation, but none of any significant size or structural consequence, and the interior floors were three or more inches above the surrounding soil. However, while waiting for his clients, the inspector was casually leafing through his own report that he had just finished printing on-site. The house was situated in an arid climate where there was usually very little rainfall, but nonetheless his report recommended installing area drains when the landscaping was undertaken. But, as he waited for his clients, he began to wonder how well the soil might percolate if such drains were not installed, and concluded that if the soil did not percolate well that water was likely to pond in one of the side yards, and possibly migrate through the tiny cracks in the slab that he had noted. Suddenly concerned, he pulled back the new carpet at an exterior wall and found indisputable evidence that moisture had penetrated the living space. Imagine this happening when furniture was in the house! Naturally, he quickly changed his report to include this observation and a recommendation for an evaluation by a drainage contractor, and learned later that a neighbor had confirmed that the house had flooded a year earlier and then been sold. Without that moment of deductive reasoning, the inspector might have left himself vulnerable to a serious lawsuit. Don’t hesitate to pull back the carpet on an exterior wall. It only takes a moment, and it won’t damage anything. Some inspectors may notice that I often recommend things that may be contrary to industry standards, such as pulling back a carpet. I apologize, but the sad truth is that standards are a last-ditch defense that an inspector should hope never to have to use. So what’s the best way to avoid such a grading and drainage lawsuit?

The only way that I know, and even this is not foolproof, is to include in your report a description of an ideal lot, and then refuse to endorse any lot that does not meet this ideal. This is what I say in a section of my report entitled “Description of Service and Limitation of Liability,” and you’re welcome to use any or all of it:

Grading and drainage are probably the most significant aspects of a property, simply because of the direct and indirect damage that moisture can have on structures. More damage has probably resulted from moisture and expansive soils than from most natural disasters, and for this reason we are particularly diligent when we evaluate site conditions. In fact, we compare all sites to an ideal. In short, the ideal property will have soils that slope away from the house, and the interior floors will be at least several inches higher than the exterior grade. Also, the residence will have gutters and downspouts that discharge into area drains with catch basins that carry water away to hard surfaces. If a property does not meet this ideal, or if any portion of the interior floor is below the exterior grade, we will not endorse it, even though there may be no evidence of moisture intrusion, and recommend that you consult with a grading and drainage contractor. We have discovered evidence of moisture intrusion inside homes when it was raining that would not have been apparent otherwise.

I hope that you will agree that this statement is entirely reasonable, and that similar statements that are designed to educate clients are among the best ways to avoid disputes. But let’s not forget about mold! It’s not likely to repeat the litigious history of asbestos when attorneys discover that there’s no money to be made in it, because mold is not covered by most policies. However, you owe it to yourself to include a mold disclaimer in your report, and to identify any suspect stains that could turn out to be mold, and you should always be on the lookout for them in those areas where mold is most likely to occur, such as in basements, around plumbing components and evaporator coils, and in poorly vented attics with exhaust fans that are not ducted to an exterior port. Remember, it’s not mold that’s the enemy; it’s moisture!