experts: real estate column Friday, April 04, 2003

When your real estate goes to pot

Across Canada, police say there are more than 50,000 active grow houses. Most of them are in residential areas and the neighbours have no idea what is happening next door. That's a big problem, say police, because grow houses are a serious danger to their communities.

By Ozzie Jurock

This article appeared in The Vancouver Sun on March 29, 2003

Pot is very profitable. Pot growing in a house is very profitable. A house can produce about 1,600 plants a year and generate $1.6 million in profit.

Across Canada, police say there are more than 50,000 active grow houses. Most of them are in residential areas and the neighbours have no idea what is happening next door. That's a big problem, say police, because grow houses are a serious danger to their communities.

Never mind, that it can also be a great danger to us as real estate investors ... as in pain in the pocket book. Fires could destroy a house, electricity supplies are tampered with and usually the place is a solid mess, after an operation is stopped. Police estimate that one in 10 of indoor marijuana operations will eventually go up in flames!

Some operators may invest $5,000 to $20,000 to set up the operation and try to protect their investments by setting up "booby traps" to discourage intruders. Needless to say you do not want to inspect your property ‘protected’ in this way.

There can also be a build up of poisonous gases from the chemicals used in the marijuana crop. Utility companies, the insurance industry and the National Fire Marshal's Office were joined by The Canadian Real Estate Association last November to launch a public awareness campaign about the dangers of grow houses.

Here are some of the things that might indicate that a house in your neighbourhood is a 'grow house':

  • Few people are seen coming and going from the home.
  • There is late night or very short visits by people.
  • There are strange smells coming from the home, often at the same time of day or night. It can smell strongly of fabric softener, or have a "skunk" smell.
  • People are continually coming and going with large bulky items or garbage bags.
  • There is evidence of tampering to the electric meter (damaged or broken seals) or the ground around it.
  • There are water and/or electrical cords running to the basement or outbuildings.
  • The home makes a humming sound or has motorized, fan-like noises.
  • The property has excessive security (guard dogs, "keep out" signs, high fences, heavy chains and locks on gates).
  • The windows of the home are always covered, and have condensation on them.
  • The neighbours are never seen taking groceries or furniture into the home. They put out little or no garbage.
  • Outbuildings have air conditioners.

Also, if great importance is something BRAND NEW. Property owners and possible pot property owners ... NOTE:

A first mortgage on real property in British Columbia is not a first charge. Governments have created many changes for themselves and others, which rank ahead of mortgages. The obvious examples are property taxes and strata charges. There are many other less well known examples (such as monies owing to Worker’s compensation Board, and for Corporation Capital Tax).

However, now the City of Surrey has created a new charge, which ranks ahead of mortgages.

Its bylaw 14422 (the “Grow Op Bylaw”) allows it to add certain costs to a property tax bill; those costs resulting from “controlled substances” (as defined in the Canada Controlled Drugs and Substances Act) on the property.

The Grow Op Bylaw was enacted because of marijuana grow operations, and it is intended to allow Surrey to add the costs of firefighting, police cleanup etc. to property taxes. In a recent case involving a major grow operation and fire, Surrey added the firefighting and police costs of over $30,000 to the property taxes (and that figure might increase to over $60,000).

Often, because of electrical, plumbing, drywall, mold, and other damage to buildings which are used as marijuana grow operations, mortgage lenders with charges on such properties suffer losses when their mortgages go into default and the properties are sold in foreclosure proceedings. One result of the Grow Op Bylaw will be to increase such losses, and to pass the firefighting, police, and other costs to mortgage lenders.

The City of Abbotsford has also enacted such as a bylaw, and the City of Vancouver is considering doing the same.

This is a new risk for mortgage lenders in British Columbia. Unfortunately, it is one which cannot be avoided easily (if at all).

To give an idea of the increase in the number of grow houses, in 1996 the Vancouver suburb of Richmond had 31 reported grow operations. By 2000 the number had increased to 345 and police say it's still going up. They estimate there may be as many as 10,000 grow houses in the greater Vancouver area, and another 15,000 in southern Ontario, mostly in the Toronto area.

As a landlord ... if someone wants to pay your rent and deposit with cash and does not want to be investigated - don’t rent it to them. Check out all your tenants at the www.tenantverification.com, get a credit report, get references and check them out.




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