Grow-ops, drug labs and real estate deals

Most people know that real estate values can be affected by how property that is being sold has been used. One of the more unusual scenarios – and the one most likely to show up on the nightly news – is when a home has been used as a marijuana grow operation and/or for the manufacture of illegal substances.

The RCMP says there are about 4,000 confirmed grow-ops across Canada presently and those are only the ones they are aware of!

The main issue with grow-op properties relates to the resulting physical damage. In order to accommodate the high levels of electrical consumption (including the use of high-wattage lights needed to grow the plants), the home often contains illegal wiring. For an unknowing buyer, there may be extensive (and expensive) remediation work necessary to restore the home back to current required electrical code standards.

The high moisture levels necessary to sustain plant growth often give rise to mould contamination, health issues and structural damage to the property. The cleanup involves a thorough environmental analysis, the involvement of engineers and ultimately construction tradespeople. The hope is that the property can be salvaged and won’t require complete demolition.

If a home is known to have been a former grow-op, it may be extremely difficult or even impossible to obtain financing and/or insurance, because banks and insurers tend to steer clear of these properties. And while less tangible, there is often a stigma attached to such residences as well, serving to dissuade potential buyers from pursuing an offer. This may ultimately result in a major price reduction and possibly a monetary loss to the seller.

Disclosure: A big concern when selling a grow-up is disclosure. There is a clear legal duty on the part of all sellers to advise potential purchasers about those issues that are reasonably considered to be relevant to the buyer’s decision. Since illegal drug operations are generally kept secret, sellers may simply not be aware of the home’s history of illegal activity. But even if they are, the scope of the disclosure obligation may vary according to the specific circumstances.

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