Dry Rot is actually a form of wood-destroying fungus - Serpula Lacrymans. The mycelium occurs on the surface of infected timber which, in still humid conditions, appears as a white, cotton-wool like growth. Bright lemon-yellow patches may also be seen in less humid situations. Dry rot can appear where timber has a moisture content of greater than 20%. Possible causes can be a plumbing or drainage leak either immediately in the area, or water ingress from the exterior.