FORMER GROW HOUSES CAN GO CHEAP

But Mould, Wiring Could Be Problems -- Insurance Is Often Difficult To Get

Interior designer Linda Makins says when she and her husband first saw
their four-bedroom, four-bathroom house in an upscale Mississauga
neighborhood, they had no idea it had previously been used as a marijuana
grow house.

"The house had been on the market for several months, and it was very
well-priced but hadn't sold," she said.

The only tipoff was that property taxes were higher than for houses in the
same price range, making the couple wonder if the house was under-priced
and, if so, why.

It was only when they decided to put in an offer that they got the answer.
Their agent disclosed that the 4,000-square-foot house had been used to
grow marijuana -- what is commonly known as a grow op (operation) or grow
house.

"We immediately got scared and pulled back," Makins recalls. "We called a
building inspection company. They told us they had gone through the house
and given it a clean bill of health. There was no mould."

The owner, who had unknowingly rented it to drug dealers, had redone it
before trying to sell it.

"He had replaced all of the floors and some of the drywall," Makin says.
"From what I understand, the house had been a mess, but you wouldn't know
it to walk in now. You could see where they hung the lights in the
basement. They had also broken through the foundation of the basement to
bypass the electrical panel."

Makins purchased the house for what she figures was $30,000 to $50,000
below market value.

For people looking for a cheap deal on a house, grow houses may provide the
opportunity. David Marshall, a real estate agent with Re/Max Aboutowne in
Oakville, has seen it happen.

"I've seen a couple (of houses) that would be a good $50,000 under market.
It depends on the owner, whether they decide to reinvest in the house, or
they just discount it, and say, 'I just want to get rid of it.'"

About 300 grow houses were uncovered by Toronto police last year, and many
of the addresses are posted on the police website.

There is no specific law that requires disclosure of the fact a home has
been a grow house, says Bob McLean, director of communications for the
Ontario Real Estate Association.

However, he says there are several disclosure requirements that realtors
adhere to that cover what is important.

"The seller and selling realtor must disclose latent defects, and that
includes if you know the house has been used as a grow house, you have
reason to suspect that there is damage caused by excessive moisture in the
house, and damage by fertilizers. The electrical wiring also may have been
altered."

If you suspect the house you are considering may have been used as a grow
house, it's best to call an inspector.

"We start in the basement and go up into the roof deck," says Art Robinson,
president of Sick Building Solutions Corporation. "One big clue is there is
new paint on the cement floor. You often find pot marks; sometimes they
have dumped earth on the floor. You look for fertilizer marks, chemical stains.

"In a grow house situation, where there has been high humidity, you will
find rust all over it and also around window frames. The mould growth is
the biggest clue in the basement, and it's something they can't, or don't,
remove. It can be toxic or non-toxic."

Robinson says sometimes a hole is punched through the floors for venting,
and that will go right up to the attic.

"That's the worst," he says, "because the roof deck gets covered in mould.
Sometimes the roof deck is warped and structurally unsound."

As well, grow house operators will punch a hole below the electrical panel
to divert electricity away from the meter, and that can be a fire hazard.

However, Robinson says all of the problems are fixable. "It depends how
much damage has been done. And how much money you want to throw at it."

Robinson says one place he cleaned up had been used by a renter as a grow
house.

"It was a gorgeous house," he says. "The place beside it had been sold for
$850,000. This was one listed at $720,000. They go for at least 10 per cent
less than market value."

Victor Kerman, a real estate agent with Royal Lepage Signature Realty,
cautions potential buyers of grow houses about possible difficulties in
acquiring insurance.

"I had one chap call me a year ago, who bought a house the year before that
had been totally renovated," he says. "He insured it then, but a year
later, when his insurance came up for renewal, it had been posted on a
police website and they wouldn't renew the insurance."

Makins says insurance isn't an issue, because damage from such an operation
isn't covered, so she is already aware that her house isn't covered if
mould becomes a problem.

However, she says that while the bank was cautious about lending the money
and wanted to see extensive reports about the house, she and her husband
were able to obtain a mortgage.

Dominique O'Rourke, director of public affairs for Co-Operators insurance,
warns buyers need to watch for serious structural issues and mould.

"Home policies exclude mould, so if you had a home that was a grow op, that
wouldn't be covered -- not a wise investment from a health or coverage
perspective."

Marshall offers another perspective.

"There's no question you can get a great deal on a home like this, but it
depends on what you want to do with it," he says. "If you turn around and
try to sell it, that is the real gauge of whether you got a good deal."