Buying a Former Grow Op
Marihuana grow operations (MGOs) and synthetic drug laboratories may seem like they belong on crime dramas on the small and big screens, but in reality, they're much closer to home. Drugs are being cultivated and manufactured behind the doors at any time of homes and buildings that Buyers may come in to contact with. MGOs can look like any other home at first glance. An MGO is defined as any building (owned or leased) that has been used to grow marihuana plants. The extreme modifications made to buildings that house MGOs can created a number of potentially dangerous hazards. Diverting electricity and tampering with electrical wiring can lead to house fires among many other issues.
1. Modified ductwork that doesn’t seem to make sense
2. Circular holes in floor joists or roof trusses from venting
3. Chunks of brickwork on the exterior that have been replaced
4. Brown stains in soffits, created by external venting, or brand new soffits
5. Stains on the basement floors caused by containers that sat unmoved for long periods of time, or stains in the laundry tubs.
6. Modified wiring and electrical panel. Sometimes, live wires can still be in the insulation.
7. New plumbing for water supply and drains.
8. Foundations and concrete walls cored or breached to get wiring around the hydro meter.
9. Warped/rotted wood structures due to excessive moisture.
Now, how does a former MGO affect, you, the buyer? I asked a few local experts their take.
AYNSLEY HOBSON, FIRST INSURANCE
1. When insuring a home that was previously operated as a grow-op, what are the initial issues an Insurance company will have? What is the risk involved for the insurer when financing an MGO?
There should be no issues on a home that has had a known grow op as they will be hit by the city or regional district for a complete over haul before getting an occupancy permit and hydro hooked back up. Full inspections will be required.
2. If a home is professionally remediated, will the insurer look at the home more favourably? Have you seen instances where the home was approved even though it hadn't been remediated?
Absolutely the company will look at the home more favorably and will require the inspection reports prior to consideration of insurance.
3. What are the repercussions if a buyer has knowledge the home is a grow-op, does not inform the Insurer, and the home later has issues regarding its stigma?
This could be considered a misrepresentation of the risk and the clients could be in breach of their insurance contract.
4. How long have former MGO's been an issue for insuring?
MGO’s aren’t an issue if dealt with in the correct manner
5. Is there a difference depending on the size and scale of the former MGO? Does it make a difference if it was "busted" by the RCMP or not?
Most definitely and the insurance companies will look at each risk individually. They will look for the proper steps to be taken in order to ensure the risk is now insurable
6. Does your company insure legal licensed grow-ops? Does the legality of the MGO effect it's insurability?
We don’t currently deal with legal MGO’s however, we do have a contact that does and would be happy to discuss this with clients
ROY & CORAE PIPER, HOME SOULUTIONS
1. At what point should a buyer of a potential former MGO contact a remediater, such as yourself?
Unless a current remediation certification is in place the home should be inspected with a professional to assess its current condition and possible issues that could arise, before removing conditions or writing an offer.
Depending on the size of the grow-op modifications could have been made to the Electrical Panel and possibly some of the structure to increase the grow area. Ventilation ducts when installed can cause structural issues due to the cutting of the floor joists and beams. Also the use of chemicals in the home to promote growth and to extract the THC can be hazardous.
The damage to some materials is not treatable and will need to be replaced. Structural and electrical and water components will need to be inspected and brought back to existing codes. There is always the home that is to far gone to repair sadly. The costs to fix the destruction the growers have caused could exceed the value that the market will support for the area the home is in.
This will depend on the size of the affected area in the home. Other factors will be the extent of the exposure to moisture in the materials.The greater the exposure to moisture the more the area has the possibility of rot and fungal growth to occur. So length of time the grow op runs affect the remediation time. Also as previously mentioned any code violations that need to be addressed.
The company that did the work will have inspection reports from Heating, Plumming and Electrical companies to start with. If the structure was affected an engineers report or city inspectors report would be needed. There will also be a clearance letter from an environmental company showing spore counts to be normal for the time of year in the home.
VICTORI ANISIMIV, DOMINION LENDING
1. When financing a home that was previously operated as a grow-op, what are the initial issues a lender will have? What is the risk involved for the lender when financing an MGO?
2. If a home is professionally remediated, will the lender look at the home more favourably? Have you seen instances of a Lender approving a home that has not yet been remediated?
4. Is there a difference in financing the home depending on the size and scale of the former MGO? Does it make a difference if it was "busted" by the RCMP or not?
Victor can't think of any of the 6 big banks that will mortgage a home that has been disclosed as a previous MGO. He has only been successful with some local credit unions. In order for a mortgage to be arranged on such a property the previous MGO must pose no health or safety concerns. What does that mean? That the home has to have been fully remediated.
For this to occur, the following needs to be completed:
1. An Environmental Phase 1 study which tests the air to confirm that there is no mold or mold spores in the air.
2. A successful electrical inspection that wil ensure wiring is to code.
3. Re-occupancy permit from the municipality
4. Confirmation the property is insurable. Many insurance companies why away from insuring prevoius MGO, but there are some that still do.
There is no national standard of remediation, and these processes vary from municipality to municipality. To repair an MGO, it is usually necessary to remove all materials down to the framing to gain access to the mould spores. Restoration can include requiring new drywall, insulation, vapour barrier and flooring. These cleanup and repair should be completed by personnel trained to deal with these types of hazards. The longer an MGO was in place, the more damage has been done. Realtors are required to disclose if they know of a listed property is an MGO (that goes for both Listing Agents and Buyer's Agents).
So, like any property, there are both pro's and con's to buying each individual former MGO. The perceived values of these homes can be under market value in addition to potentially costly required remediation and restoration.
Feel free to contact the above experts with further questions:
Roy & Corae Piper
Information provided by Jasmen McLellan, source: The Canadian Real Estate Association