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From the June 13, 2003 print edition

Legal fight over mold responsibility spreads

At Harbour House South in Bal Harbour, mold is rolling downhill.

Building owner Archstone-Smith (NYSE: ASN), one of the nation's largest apartment REITs, has filed a $30 million lawsuit in Miami-Dade County Circuit Court blaming mold and mildew problems on Miami-based architect Bernard Zyscovich, Orlando-based engineering firm Tilden, Lobnitz & Cooper and Penn Refrigeration & Air Conditioning in Pompano Beach. The companies' response: Archstone was too cheap to pay for a temporary cooling system during renovations.

Because of the problems, Archstone has been the focus of two class-action lawsuits and numerous personal injury and property damage claims.

Archstone spent $11.3 million in the second half of 2002 to clean up mold and water damage in the 452-unit Harbour House South. It has spent at least $1.7 million more in legal costs, according to documents filed with the SEC.

It also faces remediation challenges and mold infestation in at least four South Florida properties it bought just a few years ago, according to a source familiar with the properties.

Now the nation's largest apartment owner is fighting back, looking to steamroll those it believes are responsible for its growing mold problem.

In a 33-page complaint, Archstone alleges that a renovation plan designed by the contractors failed to provide for dehumidification during an extensive air conditioning system redesign, leaving the occupied building vulnerable to excessive amounts of outside summertime air. That caused already present mold and mildew to spread wildly throughout the building.

But contractors suggested that Archstone knew mold existed in the structure long before they got involved; ignored suggestions for a temporary air conditioning system during renovation because it didn't want to spend the money; and is maliciously going after subcontractors as a scapegoat even though at least one of those firms, Penn Refrigeration, is still doing work for the company.

"Anything that wasn't done was something that the owner didn't want to do and when they got hit with the class action, they had to do something and went about putting people in space suits and had to clean everything up and spend a chunk of change," said Penn President Joseph Joyce. "Now they are sending a bunch of attorneys to shake down the contractors to offset costs."

A reliance on local expertise

As a relative outsider, based in the Denver suburb of Englewood, Archstone-Smith said in the lawsuit it relied on the local contractors more familiar with the semi-tropical climate: "Plaintiff, who is unfamiliar with South Florida humidity and the construction of an HVAC system in South Florida, relied upon the "acts, recommendations and advice" of Zyscovich, TLC and Penn.

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2003 American City Business Journals Inc.

Selling for strength: She knew she couldn't limit herself.


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