April 8th - 2005

Grow houses still a burning issue in Ontario

Marijuana grow house operations and their implications have been headline news in Ontario and the rest of the country, and often linked to other heinous crimes.

Marijuana grow house operations and their implications have been headline news in Ontario and the rest of the country, and often linked to other heinous crimes. The implications of these operations for REALTORS® who list and sell them also continue to be a hot issue in Ontario. The Canadian Real Estate Association (CREA) has developed a booklet entitled, "Grow Ops, What REALTORS® need to know," to help REALTORS® educate themselves about this growing problem.

What are grow houses?
Grow houses are homes either purchased or rented by criminals who turn the home into a hydroponic grow lab for marijuana plants. They typically set up shop in the basement of the home, drill through the foundation to tap into the main hydro line to bypass the meter and usually cut holes in the floors, ceilings and roof to vent out the enormous amount of moisture created by the growing of these plants.

Once the home is vacated either because the police have busted the operators or they have moved on, it is often made available for sale. The potential problems associated with selling a former grow house include structural deficiencies due to the alterations, and fire and health hazards as a result of the fertilizers used and chemicals produced by the plants.

What you need to disclose
CREA's booklet provides information about the disclosure implications of grow houses for REALTORS®, what to look out for as well as a guide to the legal issues. REALTORS® need to know what the health and safety issues are after a grow op has been dismantled and comes back on the market. You also need to know what remedial action was taken to make sure the house is safe.

The issue for disclosure is not always easy. The grow op may have been in operation for only a few weeks, in which case mould or moisture damage would be minimal. There can also be the issue of the legal rights of the accused in the case of a grow op arrest preventing the REALTOR® from making public statements before conviction. In all cases, if you are unsure of your responsibility, seek legal counsel.

Although the potential for criminal and other legal ramifications for REALTORS® who list and sell a grow house is unclear, the best line of defense as always is to disclose everything. Even though there may not be a legal obligation depending on the circumstances, your obligations as a listing agent under the provincial and national codes of ethics require you to clearly explain to sellers that while they may have no legal obligation to disclose to the buyer that a property was used as a grow op, you do.

You also have an absolute obligation as a buyer agent to disclose this information to a client and if you are representing both the buyer and the seller as dual agent, you have an agency obligation to disclose all pertinent information to both parties. As the seller may have no such obligation in law, it is extremely important that sellers be made aware of your obligation before they agree to the dual agency.

Money laundering
Police have identified grow ops in Canada as a major avenue for money laundering because the cash from the crop can be used to purchase or access real property - often for the purpose of creating another grow op.

REALTORS® have been innocently implicated in money laundering cases involving real estate because there was nothing obvious to indicate the transaction involved proceeds of crime. If you are directly involved in a large cash transaction of $10,000 or more, review the money laundering procedures your broker office should have in place. You may be in a position where you have to comply with federal money laundering regulations or simply report a grow op to a local Crime Stoppers.

Tips for REALTORS®
Keep an eye out for suspicious activity such as:

  • Third party purchasers
  • Questionable income sources
  • No contract negotiation
  • Offers to pay in large amounts of cash
  • Multiple cash transactions
  • Multiple down payments on behalf of one individual
  • Secretiveness

Also be aware of clients who are financing multiple homes, and switching between first and last names for different transactions. Look for a common thread. For example, do you recognize the same clients buying multiple homes in the same neighbourhood?

To view a complete copy of CREA's Grow Ops booklet, log on to www.realtorlink.ca and use Search REALTOR Link® for "Grow Op."

Learn more
OREA's continuing education course entitled Money Laundering and Grow Houses will help you to understand the concepts of Grow Houses and the Money Laundering legislation that's in place to protect you and your clients. Using examples to illustrate the information provided, the course teaches you to recognize grow ops and money laundering situations and provides tips on how to deal with them. The course is worth three MCE Credits towards your Mandatory Continuing Education requirements.

By the end of the course, you will be able to:

  • Recount the ramifications of selling or leasing a property that has been used as a grow house;
  • Recognize the characteristics of a grow house;
  • Avoid liability by knowing what to disclose to the public about grow houses.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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