This is my second investment property, a duplex, which I purchased in August this year. Similar to my first property, I waived the inspection, and the seller’s disclosure did not report any major issues. At closing, one tenant moved out as part of the agreement, and the other tenant (a single adult who had been living there for about 1 year and 5 months) stayed. We decided to keep that tenant.

After we took ownership, the remaining tenant started making multiple repair requests—bathroom, windows, and also suspected mold. They mentioned worsening asthma and respiratory problems, claiming they now need prescribed medication, and asked us to check for mold. Since we didn’t see any visible mold and the tenant is a smoker, we dismissed it as humidity and did not take action at the time.

Later, while preparing renovations on the vacant unit, we discovered signs of water damage/mold in corners where the ceiling and walls meet. The former tenant told us that when they requested repairs before moving out, the previous owner had only painted over the issue instead of fixing it properly.

Recently, things escalated: the current tenant (who is moving out at the end of this month after we gave notice) said their lawyer would sue the previous owner for exposing them to mold-related health risks. A lawyer has already contacted us asking if we had knowledge of any mold problems. To complicate matters, during renovation we found mold in the attic, directly above the current tenant’s bedroom area, and it seems fairly significant. The tenant claims to have a doctor’s report linking their respiratory illness to mold exposure...

of course, I have shorter version by GPT for you guys.

Facts

• Bought my 2nd investment property (duplex) in August, waived inspection.

• Seller’s disclosure showed no major issues.

• One tenant moved out at closing, the other tenant (1.5 years in the unit) stayed.

• Tenant soon complained about repairs + suspected mold, claiming worsening asthma/respiratory issues.

• Initially, we saw no visible mold and dismissed it (tenant is a smoker).

• During renovations, we later discovered mold/water damage (corners and attic above tenant’s bedroom).

• Former tenant said the previous owner just painted over mold or mildew instead of fixing it.

• Current tenant (moving out end of this month) has a doctor’s note linking illness to mold.

• Lawyer has already contacted us asking if we knew about mold. Tenant plans to sue the previous owner.

Issues

• We may get pulled into the lawsuit as current owners.  (Low chance though)

• Mold was clearly pre-existing, but inspection was waived.

• Previous owner seems to have knowingly concealed the issue.

Question
👉 Has anyone dealt with a similar mold + nondisclosure situation? From experience, what’s the best financial/legal strategy: fight, settle, or pursue the seller? My plan is to sue the previous owner to minimize my financial losses and, if possible, take legal action that benefits us..