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Dry Rot is caused by prolonged exposure to water or pet urine in your rug. For example, there may have been a pot or planter which continuously leaked into your rug unnoticed for a long time. Secondly, perhaps a pet may have used the same spot on your rug for a long time. As a result, your rug may now have a crack or a hole as a result of the foundation weakening and breaking from dry rot.