GROW-OPS

Considerable attention has been paid in the media over the last few years to the phenomena of "grow-ops" and "meth labs" in residential properties. According to Wikipedia the term "grow op" is short for marijuana grow operation in which cannabis plants are grown usually in a domestic setting, sometimes with the intent of creating large amounts of marijuana for commercial purposes. The term may also apply to mass-growings of magic mushrooms. Although there are significant variations of climate in which cannabis can be cultivated, grow-ops will often make use of hydroponic technology and high pressure sodium lamps or HID (High Intensity Discharge) lighting to grow the plants indoors, and thus reduce the likelihood of detection and increase the level of control over the growing environment.

Methamphetamines (also known as crystal meth, crank, or speed) are produced in illegal clandestine drug laboratories that are commonly found in motels, rural areas away from the general public, and residential areas, including houses, apartments, and garages. Mobile labs have also been found in vehicles abandoned along roadsides or in parking lots. Meth labs commonly have an unusually sweet or strong odour such as ether, ammonia, or auto parts cleaner. The windows of buildings containing meth labs are often covered, blacked out or frosted to prevent anyone seeing inside. Sporadic traffic throughout the day and night and unusual trash containing large amounts of empty anti-freeze containers, camping fuel cans, battery parts, stained coffee filters, drain cleaners, and glassware are common attributes of meth labs. (There are five parts waste by-products to every part product).

Both uses of property result in health hazards and considerable damage to the buildings in which they take place. Diversion of electrical power for grow-ops can result in electrical safety hazards. A police report called Green Tide, recently issued in Southern Ontario, says the likelihood of a fire in a grow-op dwelling may be as much as 40 times greater than in a typical residence. According to the Kansas Department of Health and Environment, the contamination resulting from a meth lab can affect soil, ground water, air, furniture, and structural elements such as flooring, vents, and walls. The chemicals used in the meth cooking process can be harmful if humans or pets are exposed to them, potentially causing headaches, nausea, dizziness, skin and eye irritation and burns. Short-term exposure to high concentrations of some of these chemicals is common to fire fighters and law enforcement officers first entering a lab. Such exposure may cause severe health problems such as lung damage and chemical burns. The structural damage that is caused to a home used as a grow-op can be devastating. On the surface, once the grow operators have vacated, it can appear that the home has been cleaned up, however, the concern lies with the unseen contaminants caused by mould growth, water and chemicals that are used in such operations, as well as structural damage resulting from high humidity.

Many jurisdictions are passing laws requiring the owners of properties used as meth labs or grow-ops to repair and/or decontaminate them. This can be very costly. If the property owner does not comply, a notice can be registered against title and often the government body having jurisdiction can cause the work and collect payment by placing a lien against the title or a charge for unpaid taxes against the property. It is my understanding that confiscatory legislation is being contemplated with regard to meth labs and grow-ops in British Columbia. In certain circumstances this can also result from the proceeds of crime provisions of the Criminal Code of Canada. As a result, an increasing number of mortgage terms provide that use of a property for the production of illegal substances is an act of default under the mortgage entitling the lender to terminate the loan.

In the January 16, 2006 issue of Realty Times, columnist Jim Adair reports that the new home warranty on houses and condominiums can be suspended by use of that property as a grow-op. "Homes that have been used for uses 'other than residential' can have exclusions to their warranty. Since the houses can become damaged by the moisture, mould, bad wiring or other alterations made for a grow operation, companies that provide the warranties are sending inspectors to the homes and then suspending coverage in whole or in part. In some cases, the houses can be repaired and returned to full warranty status".

In November, 2004 the British Columbia Registrar of Mortgage Brokers issued an open letter and amended the rules for mortgage brokers surrounding verification of information provided to lenders. The concern arose out of the impact of grow-ops on property values. First, the superintendent stated, a person wanting to buy property for a grow-op will be willing to pay an inflated value for quick possession. This results in higher prices in the vicinity. Often high-end properties in up-scale neighbourhoods are targeted. Mortgages are obtained using fictitious purchasers and/or false employment and down payment information in the application and the superintendent is concerned with the proliferation of these types of transactions. Once the use as a grow-op is discontinued, the value of the property plummets due to the damage or the knowledge that the property was used for that purpose. (The standard Property Condition Disclosure Statement used by Realtors in British Columbia requires disclosure of past use as a grow-op or meth lab). On investigating, the Superintendent discovered that very little, if any, due diligence had been carried out by a significant number of brokers involved to ensure the accuracy of the information provided on the mortgage application. In turn, lenders relied heavily on the information sent either by the applicant or the referring broker.

Bulletin MB 04-005 Misleading Information issued under the Mortgage Brokers Act states "Mortgage brokers cannot say that it is not their responsibility to verify the information being given to them during the application process. Lenders indicate they assume that mortgage brokers have verified the information before forwarding it on. This office takes the position that a mortgage broker has a duty to ensure the information being sent to a lender has been verified".

Illegal use of residential properties is on the rise and can result in significant damage to those properties targeted. Remediation may be mandatory, and economic loss can result from that requirement as well as from damage to property and the stigma of the property having had that use. Illegal operators often apply for mortgage financing using false information. New home warranties can be voided. The danger is present and the risks are high, such that professionals involved in the real estate industry are obliged to be alert to them or face potential liability under regulations and/or the law of negligence.

18 January, 2006

For more information, contact Stewart Johnston Law Corporation at 38LAWSJ (385-2975) or email stewart@sjlaw.ca