Is your new home a former grow-op?
Is your new home a former grow-op?
Chemicals, wiring changes and mould pose d
The Laval bungalow’s entrance closet and pantry appeared black and rotten, but Joe Gagliano’s children were immediately drawn to the spacious suburban house, and the idea of having their own rooms.
It was only after buying the foreclosed home, and removing the kitchen cabinets and the bathroom tiles that Gagliano discovered more rotten black patches. The damage that Gagliano said he’d been told was isolated to a few rooms and involved $30,000 to repair turned out to be widespread – likely the result of the home’s former vocation as a marijuana grow-op.
“I got the shaft,” claims Gagliano, 49, a foreman at a welding company. “Our broker told us that it was like that because of a leaky roof. But this is not $30,000 worth of repairs. It’s contaminated to the extreme.
“If they had told me this had been a grow-op, we would never have bought it.”
Gagliano didn’t bring in an inspector when he and his three eldest adult sons bought the home without legal warranty for $162,500 in October 2011 – the family of seven claims their real estate broker told them they didn’t have the option of inspecting the house. But in a motion filed this past week, Gagliano’s lawyer Daniel Rafuse argued that seller Laurentian Bank still had a “general obligation” under Quebec’s Civil Code “to act in good faith and to disclose information that would play a sure role in one’s decision to agree to contract.”
Gagliano’s case is pitting buyers’ responsibilities against rising demands on owners and brokers to be fully transparent when selling homes at a time of soaring real estate prices in key Canadian markets.
Identifying homes once used to manufacture marijuana and methamphetamine is critical because residual chemicals, manipulated electrical wiring and the presence of mould linked to illicit drug production not only substantially raises the cost of repairing these homes, but could have implications on the health of future occupants.
Some police forces like the Sûreté du Québec have reported a drop in raids on indoor grow-ops, to 499 during the current year from 592 in the 2009-2010 fiscal year. But Montreal police figures show that the volume of marijuana plants seized in its territory has exploded to 126,000 last year from 34,000 in 2006.
With an estimated 50,000 grow-ops across Canada, illicit drugs have been manufactured everywhere from rural B.C. farms, to a Montreal frathouse, and more recently to condos in Toronto high-rises, which have broader implications for co-owners.
“It’s huge; a really big deal,” said Toronto condo lawyer Chris Jaglowitz, over the impact of grow-ops on real estate. “And over the last five years it’s exploded.”
These issues are especially crucial in Quebec, which lags behind many other Canadian provinces, both in terms of making former grow-op addresses available to the public and creating liaisons between law enforcement and city health officials to ensure these homes are fit for habitation, either by new owners or renters.
The RCMP, along with municipal police forces in Winnipeg and Calgary publish online lists of homes that up to a year ago were discovered to be grow-ops or clandestine labs within their respective jurisdictions. And Vancouver has a decade-old “Grow Busters” program which integrates municipal law enforcement with a city team that inspects buildings damaged because of marijuana-grow operations, with the power to declare the properties uninhabitable until the requisite repairs are completed.
By contrast, neither Montreal police nor the SQ publish the addresses of former grow-ops.
Montreal police will make sure the site is free from dangerous wires and other debris, but it’s up to the owner – upon being informed of the raid – to do any repairs, a spokesperson said.
For the SQ, unless it’s determined that there is an immediate danger to the public, Quebec police are bound by such high privacy standards that officers cannot even tell an owner that his property, rented to a tenant, was the site of a grow-op, SQ spokesperson Sgt. Grégory Gomez Del Prado said.
“It’s up to the police to decide on a case-by-case basis,” he said.
While sellers and brokers in Quebec, Ontario and B.C. could face litigation if it is proven that they knew but concealed information about a home being a grow-up, such measures provide little solace for the unwitting buyer. Lawsuits are costly and there have been cases where owners of homes used as grow-ops will fix up their properties, sell them quickly and take off, said Don Campbell, president of the B.C.-based Real Estate Investment Network.
“The renos and rehabs are much more sophisticated,” he observed.
That’s why groups representing real estate investors and brokers have called for the creation of provincial or even a national registry that would compile the addresses of all former grow-ops, up to a year after the bust.
“We have tried for years to find the solution of creating a common register for all the homes used for drug-making in Quebec,” said Robert Nadeau, president and CEO of the Organisme d’autoréglementation du courtage immobilier du Québec, or OACIQ, which enforces the province’s Real Estate Brokerage Act.
“Any information that could be centralized would be a real gem,” added Melanie Reuter, REIN’s research manager.
Quebec police forces have shown “good will” in making this kind of register a reality, but they are concerned over potential liability for presenting inaccurate or incomplete information, Nadeau said.
In Gagliano’s case, it has yet to be shown if Laurentian Bank – which wouldn’t comment on the case – knew that the home on quiet Cyrano St., in Laval’s Saint Francois district, was the site of a November, 2006 police raid that uncovered 1,000 marijuana plants, a warrant shows. Almost a year after the raid, property transactions show Laurentian issued a $206,363 mortgage to the previous owner during a private sale in 2007.
When Laurentian seized the house for nonpayment and then listed it for sale in 2011, the bank made no declaration on the property. The bank did note that the sale would be “at the buyer’s risk” – a caveat that would give the family no recourse in the case of a latent defect like a rotten interior beam.
But even without a legal warrantee, sellers must reveal whether the home was used as a grow-op, real estate experts say, since that information is material to a sale and is not always evident from inspection. Even a mould specialist hired by the Gagliano family, which broke down walls and used sniffer dogs to examine the property, only suggested: “It is possible that this house was used for the growing of marijuana.”
“Even if you sell a home without legal warrantee, you must divulge this information if you have it. It’s too important an element in the transaction,” said Montreal real estate lawyer Yves Joli-Coeur. Rafuse wouldn’t comment on Gagliano’s specific case. But he cited a 2009 decision where a Quebec small claims court judge reprimanded the Laurentian Bank for failing to tell a buyer up front that a foreclosed home it sold without legal warrantee had been a marijuana grow-op.
“We’re not talking about latent defects. We’re talking about the seller’s duty to inform of special circumstances,” Rafuse said.
“A buyer can’t assume there was an industrial grow-op in the house.”
Indeed, unless a seller declares that his or her home was used as a grow-op, it is very difficult for a broker to know because not all Quebec police forces and courthouses are willing to share that information, Nadeau said.
“It’s not a policy to reveal this information to an owner, or to a municipality,” the SQ’s Del Prado said.
He said an individual could look up search warrants –research that Nadeau of the OACIQ describes as “very arduous” for the average buyer, or broker.
In the Laval case, Gagliano said he became suspicious after seeing the mould specialist’s report and stories from a neighbour who told him that there had been police at the house a few years back. Gagliano said at his request, his broker Mathieu Labrecque found information about the raid at the Laval Courthouse.
Labrecque, who now works for Re/Max in Quebec City, was investigated by the OACIQ but has been cleared of any disciplinary action. Labrecque refused to say whether he’d told Gagliano that the bank would not allow the family to send an inspector to the house, or that the damage was caused by a leaky roof and would only cost about $30,000 to fix.
“I have no comments to make,” Labrecque told The Gazette. “All has been taken care of by the OACIQ.”
The bank’s broker Marc-Etienne Lambert, of a Re/Max in Laval, denied ever objecting to the family bringing an inspector. Lambert, who was also cleared of blame by the OACIQ, said he couldn’t understand why Gagliano wouldn’t send an inspector to examine the home, which he called “the dirtiest house, in the worst condition I’d ever seen in my career.”
Lambert said he believed the Gagliano family “made an emotional purchase.
“I think they have a strong responsibility here.”
Gagliano said he was not aware the house had been used to cultivate marijuana. He acknowledges that the family was attached to the house, but that was before they knew it was a grow-op. In the current market, it’s extremely tough to find a six-bedroom home in the family’s budget of around $200,000.
Between 2011 and 2013, the average price of a resale home in the Greater Montreal Area is expected to rise between $314,011 and $330,000, the Canada Mortgage and Housing Corp. forecasted on Thursday.
“It was a big house. For $30,000 in renovations we would have been able to fix it,” he said. “At that price, it was affordable for us. Now we understand why the price was that low.”
Since they cannot afford the repairs, the family with four adult sons and a seven-year-old girl has put the home up for sale for $120,000 – more than $40,000 less than they paid for it – and is living in two Montreal rental apartments. But in Gagliano’s listing, it clearly states that the home was a former grow-op
“They wiped us out,” said his wife Giovanna Mastrovito. “We are paying a mortgage and we’re paying rent.”
Read more: http://www.montrealgazette.com/business/your+home+former+grow/6791192/story.html#ixzz1yiOtUOpP