GROW-OPS: HOMEOWNERS BEWARE

Best Defence Against Renting To Pot Growers Is Extra Vigilance

New landlords are justified in feeling a bit anxious after seeing police
bust countless marijuana grow operations on the nightly news.

The busts are such a common sight that the Vancouver Police Department
named its anti-pot squad Growbusters. Officers systematically obtain search
warrants, go to the suspected grow-op and place a sandwich board sign
outside that says "Growbusters work in progress," explained VPD
spokesperson Sarah Bloor.

In 2003, Growbusters barged into 350 homes. Their entry tactics often cause
damage to the house, and grief for investment-property owners. Landlords
also have reason to worry about fires starting, thanks to botched rewiring
by tenants wanting to power halogen lights, said Harmon Hayden, a partner
at the law firm Watson Goepel Maledy.

He warns against extensive damage from condensation and mildew caused
during the marijuana growing process.

Hayden's biggest tip is for landlords to insure rental properties and
thoroughly read insurance agreements.

Insurance company representatives are increasingly savvy to their
liability, so they are including more specific exclusions from coverage,
Hayden said.

Some new insurance policies specifically exclude coverage for grow-ops. If
an investment property owner's insurance policy does not exclude coverage
for grow-ops, the premiums are likely much higher, he said.

He linked vulnerability to marijuana grow-operations with other kinds of
liability such as the common slip-and-fall litigation that comes if snowy
sidewalks aren't shoveled or if other hazards befall visitors.

"Homeowners are exposed to all sorts of risks, so they should carry out
regular reasonable inspections of the property," he said. Failing to make
those inspections may nullify coverage, he said.

Case law involving insurance disputes for damage to grow-op or
meta-amphetamine lab properties is scarce, Hayden said.

One of the few cases is known as Bowers versus Farmers Insurance Exchange,
according to Singleton Urquhart partner Paul McDonnell. In that case an
insurance contract explicitly denied coverage for mold and mildew damage
but permited claims for vandalism damage .

Mold damaged the property in question but the Washington State judge found
that mold was not the "proximate cause," or the cause that set off an
unbroken sequence of events resulting in property damage, McDonnell said.

Essentially the Washington State judge found that the tenant's actions to
establish the grow operation were vandalism. That malicious disregard for
the owner's property then directly contributed to mold and mildew damage.
So, the judge found in favour of the homeowner, McDonnell said.

"The proximate-cause issue has been considered in B.C. and the same line of
thinking was applied as in the Washington State case," McDonnell said.
Hayden, however, is unconvinced that the proximate-cause defence has merit.

"Place no reliance on the proximate-cause defence because it depends on the
wording in each and every policy. If you go down the proximate-cause road,
it can get unpredictable," he said.

Instead, he believes the best defence is keeping an eye on the property.

Hayden advises investment property owners to get to know their tenants'
neighbours and to give them their phone numbers.

Then, if tenants have loud parties, if the property is damaged or if
tenants spend long periods of time away from the dwelling, the homeowner
will know. "Never get rent in cash. That's a tip-off that something isn't
right," said Hayden.

Landlords should also see identification such as a driver's license or a
credit card from their tenants, he said.

Investors in residential real estate may soon have some help from the Real
Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board.
Those two boards have jointly developed a public policy stating that
homeowners must disclose past marijuana grow operations when they sell
property.

Both boards are urging the B.C. Real Estate Association to amend the
property disclosure statement to clearly indicate that a property is a
former grow-op. Hayden cautioned that extra vigilance alone might not be
enough to protect your investment property.

"If after all those precautionary measures, there's still problems and
you're not covered, get a knowledgeable lawyer with experience in insurance
claims," Hayden advised.