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| Grow-Ops - Cont'd |
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| Some of the Risks: |
No matter what the buyer's financial risk tolerance may be, understanding the associated costs (financial and otherwise) or clues to avoid buying into a grow-op home is information you need under BC's current standard of due diligence or "Buyer Beware".
Some of the risks are:
* Voided home warranty coverage * Voided home insurance * Costs to repair damages * Repairs to meet current building codes * Electrocution hazards from faulty wiring * Health hazards due to mould * Carbon monoxide hazards from tampered gas appliances * Fire hazards * Chemical/pesticide residue/hazards * Loss of rental income
* Homes becoming temporarily uninhabitable * Unwanted visitors from previous marijuana or drug activities * Detrimental effects on the well being of the neighbourhood
A normal looking main floor of a home (left),
could hide a past elaborate marijuana grow-op operation
in a basement, attic or crawl space (right).
Photos courtesy of the Port Moody Police Department
| What information is available at time of purchase: |
You may wonder what information is available through the listing realtor. According to a document published by the Canadian Real Estate Association, sellers and the listing realtor are obligated to disclose grow-op activity when:
1.) There is an actual material latent defect of which the seller knows or ought to know, or:
2.) The buyer asks a specific question or expresses specific concern or;
3.) The agreement of purchase and sale contains representation that the property was used as a grow-op or for criminal activities, or;
4.) There is some statutory requirement (a law) that this disclosure be made.
In 2004, the BC Real Estate Association's Property Disclosure Statement (a statement filled out by the Seller disclosing what they know about the property) was updated to include the following question:
"Are you aware if the premises or property have been used as a marijuana grow operation or to manufacture illegal drugs?".
Although this was a welcomed addition, some Sellers do not fill out the Property Disclosure form. This can occur more frequently if the property was used for rental purposes or is being sold under court order (foreclosure). A landlord should have knowledge of what repairs have been undertaken or any renter complaints. As a Buyer, you can insist on a completed Property Disclosure form, but often this is not discussed during the negotiation process. Another concern is, there is no specific question dealing with mould and mould remediation (how much mould and how it was removed).
Since there is no statutory requirement to disclose under the BC Real Estate Act and unless it falls under the first three above noted exceptions, it appears that disclosure may not be required on previous marijuana grow-ops or illegal activity. Until an undisclosed grow-op case goes to court, the responsibility of the seller or listing realtor to disclose a former grow-op is ambiguous.
CITY TV and BCCTV reported that a realtor may have been involved in a marijuana operation discovered in Port Moody. Would an involved realtor disclose the past or present condition of a grow-op home?
A buyer's agent (acting on behalf of the buyer) or a dual agent (acting on behalf of both the seller and the buyer) does have a legal requirement to disclose if they knew or should have known that the property was used as a grow-op.
Through the leaky condo crisis we have learned that a Seller's disclosure may not necessarily reflect the true condition (past or present) of the property. The Property Disclosure form should be viewed as only one of many risk management tools Buyers should utilize to make an informed purchasing decision.
| Do your due diligence - Understand the risks: |
Buyers should not revoke their right to a home inspection even if they are in a competitive bid situation. It is an important risk management tool. If a home looks suspicious to you, thoroughly investigate the risk and insist the Seller provide a completed Property Disclosure form and that the form be part of your contract of purchase and sale (written in the contract). A disclosure may be difficult to obtain when dealing with a property that is a court ordered sale. Consult legal advice in this situation. If you are relying on a representation made by the Realtor, include those statements in your contract - get it in writing. This would protect you, should you be forced to recover losses through the courts, that a representation was made as to the past or current condition of the property.
Also see: What you should look for to avoid buying a grow-op
If you unknowingly purchase a former grow-op property or one that had criminal activity conducted in it, the only recourse you have to recover any losses is through the courts. In BC, small claims court limits actions to $25,000. Actions over $25,000 may be cost prohibitive. The burden of proving that the realtor(s) or seller had known or should have known about the property's history can be onerous. The Property Condition form will at least clarify what representation was made. Ultimately, doing your due diligence prior to being obligated to the contract is the best form of risk management.
Buyers should be aware that the costs associated with repairing a previously unrepaired grow-op could substantially escalate if the situation has been, or becomes, identified by local governments or police. Many local governments (municipalities) are adopting by-laws that are substantially increasing the costs of fixing grow-ops in homes. These by-laws can require building, gas, plumbing and electrical permits to ensure that the home does not pose safety risks. The utility companies could disconnect services and a sign could be posted at the front of the home stating that the house is unsafe for occupancy. If occupants with children continue to reside in a grow-op damaged premise, child protection services could be involved to protect the health and well-being of the resident children.
Another risk is, you may have to undertake more costs to meet current building codes despite the fact the home may have met the building code requirements at the time of original construction. You could also be at risk of losing your mortgage helper if, in the course of repairs, the local government discovers you have an unauthorized suite. Note: The repair process will differ from city to city since each local government determines its own by-laws on repairing identified grow-ops. You should contact the local government where the property is located to better understand your risks and costs.
Another concern is whether the home becomes uninsurable or coverage is limited because of previous grow-op or illegal activity. Use as a grow-op may also affect the home warranty coverage of newer homes. Prior to purchasing such a home, you should consult the warranty provider (if applicable), your insurer (house insurance provider) and legal counsel to better understand the risks you will be assuming.
Remember Erin Brockovich? She purchased a million-dollar home just outside of Los Angeles with the money she received from a successful lawsuit against Proctor & Gamble. This 10-year old home leaked and she has alleged that her family (including herself) is ill from exposure to mould. She has successfully lobbied the California government to require statutory disclosure of mould on properties for sale. Could our provincial government legislate such a disclosure in the future? Future statutory disclosure on mould or illegal activities conducted on the premise could affect property values.
Those purchasing previous grow-op homes that have been identified by local governments and fixed under tough local by-laws are better served. The concern in these situations is one of health risks from mould spore exposure. Although the mould itself can be removed, spores that are invisible to the eye can continue to be present in your home for up to 50 years (depending on the species). Some local governments may have strict mould removal guidelines. These mould guidelines can be very expense to homeowners.
| Health risks: |
Through the "leaky condo crisis", we have learned that mould spores can cause debilitating illnesses to some. Occupants that are pregnant, a child, are elderly, have compromised immune systems, chemical sensitivities or respiratory problems are at greatest risk of adverse effects. Owners can take extra precautions by hiring an environmental consultant and choosing contractors that specialize in mould removal to reduce the mould spores that are released into the air. This is very costly and unless covered by insurance, most homeowners remove the mould themselves without understanding the potential consequences or suitable precautions they should take. Since mould removal may have been done without minimizing mould spores released in the air, you should be aware of the risks by consulting a Certified Industrial Hygienist (American certified) or Registered Occupational Hygienist (Canadian certified). There are some tests available to determine whether a home has unusually high spore counts, but they are expensive and require, depending on the tests, from two days to three weeks for the results. If you find mould, it should be cleaned properly. Mould spore counts or testing is mainly useful for determining a potential problem before being committed to buying a home or for litigation purposes. You may be able to attain some information from your local community health department. More information is available under the Current Issues menu, 'Mould and your Home'.
Other useful sites:
Mould - Condominium Owners' Guide to Mold - CMHC
Mould - Fighting Mould - The Homeowners Guide - CMHC
If you are purchasing a home that you suspect is a repaired former grow-op but repaired without the local government's approval, the repairs could be insufficient, mould could be hidden, and fire or other hazards could still exist. If the utility meters were bypassed, the utility company could disconnect your service until permits are taken out and repairs completed and approved by the local government. This could force you and your family to move out temporarily. Whatever the condition of a grow-op or former grow-op home, inquiries at the local government are helpful to determine the level of scrutiny placed on identified homes and/or the risks that you could be assuming.
| Rental properties: |
If you are considering renting part of or your entire home or are assuming a tenancy that is already in place, you should review the information provided by the Residential Tenancy Office.
If you have a tenant that you suspect is conducting illegal activities you should visit the RTO website entitled "Ending a Tenancy"
You could also call the local police department or government but be aware of the ramifications of alerting authorities as detailed previously in this article.
For a Residential Tenancy Office near you, visit:
Or call Enquiry BC at 604.660.2421 or 1.800.663.7867 outside the Greater Vancouver Area.
For information regarding fee based tenant screening or landlord support visit our 'Links' page and scroll down to 'Links of Interest'.
In all cases, you should inquire with your property insurance company as to what (if any) coverage they provide for damage caused by illegal activities and damage caused with unauthorized accommodations (if applicable).
| Conclusion: |
How much does grow-op activity contribute to rising real estate prices? In today's active market, many properties are selling well above asking prices. Since most people purchase homes in their highest range of affordability, this leads one to ponder where a buyer would have access to tens of thousands of additional dollars.
Legitimate buyers may be out-priced by unlawful buyers. A buyer purchasing for grow op purposes would not be concerned about the condition of the property. Don't be caught up by the real estate craze and write a no subject offer. It may be better to say "I wish I bought that house," then to say "I wish I never bought that home".
The combination of our lax laws (which draws more and more of this activity to BC), the burden of grow-op repairs falling on the homeowner and the unfairness of buyers using laundered money to outbid legitimate buyers could price honest British Columbians out of the market and out of their homes.
One thing is clear, without tougher laws, more British Columbians will be affected directly and indirectly from this illegal activity. Something must be done to stop this growing problem.
