Few communities in Canada have escaped having a Grow Op found in their midst.
Once busted, the cost to clean up the consequences of having a Grow Op in the home varies from community to community, depending on how active local authorities have become against drug trade.
The cost of Reclamation is growing!
The Canadian Real Estate Association publication “Grow Ops – What Realtors Need to Know” of December 2004 quotes the Insurance Bureau of Canada that $41,000 is the average cost for damages due to a Grow Op.
So, if you were thinking that former Grow Op listed at a discount of the normal price is a bargain: “buyers beware.”
For example, in Calgary, Alberta, the Health Inspector soon follows the Police Inspector into a Grow Op home. In order to test for mold toxicity, the drywall is punched in many places in all rooms, the trim is pulled from the walls, and the ceiling is pulled. So, it is not just a matter of bleach washing and re-painting over the mold stains left by the Grow Op.
Oh yes, the Health Region also puts a charge against the property title. The charge will not be removed until a Reclamation specialist has completed the clean up and renovation then provides clean air reports. A recent reclamation done by a Financial Institution who had a Grow Op in foreclosure had a bill for $65,000. The sustained humidity from the Grow Op caused some structural damage.
Will your insurance cover damages?
It is important to confirm with your insurance provider what damages may be excluded from damage claims. Losses due to drug operations are an insurance concern.
This is also important to check your insurance coverage if you are not occupying the property. If someone else is living in the property and is engaged in a criminal activity that results in damages to the property – your claim maybe denied even if you are innocent of participating in the production of drugs.
Financing may be an issue (even mortgage renewals).
If you already own the property and it has become public knowledge it was a Grow Op, when your mortgage comes up for renewal, the financial institution holding the mortgage is not obligated to offer you renewal terms. The lender may demand the balance in full.
Many mortgage lenders will not offer financing on properties that housed a Grow Op. There is an environmental risk associated with former Grow Ops that causes concern. Mold spores can remain dormant for years. If they were not properly eradicated there maybe a future risk of regeneration of mold. Warm, moist conditions can allow dormant spores to regenerate. The lender may become responsible for the environmental clean up when the mold starts up again.
When lenders learn of an issue regarding the property after they have given an approval, if that information would have caused them not to offer an approval before, had they known – they may refuse to complete the mortgage transaction. This means that obtaining an approval on a former Grow Op does not mean the mortgage will go through. Where will you obtain an alternative mortgage source?
Buying a former Grow Op at a bargain price will need significant investment cash. Usually, while in its discovered state, you will need Equity financing. It comes at a higher price in lender fees and interest rate. Additionally, you will need the cash resources to make the necessary reclamation. Once the house is inspected and found clear of mold and spores, some lenders will provide refinancing or will allow for purchaser financing. You will need a proficient mortgage broker to lead you through the transition of purchase, improve and refinance or sale.
What if the future occupants have compromised immune systems or asthma? Who carries the legal and ethical guilt, if the toxicity of regenerated mold causes a death?
To be continued…… part 2 of 2.
Websites: Canadian Real Estate Association
Greater Toronto Area Mortgages and Real Estate 