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Grow Op Damage Blindsides Unwitting Landlords Municipalities Amassing Derelict Properties
September, 2007
By Barbara Carss
Ontario's legislative response to marijuana grow operations delegates new responsibilities to local governments along with the authority to order a wide range of remediation measures. Buildings could be subject to unsafe building orders, environmental assessments and/or demolition, while building owners, regardless of whether they knew of the illegal activity, face hefty cleanup bills on top of other possible penalties.
"The Toronto Police are shutting down one [grow operation] a day on average and they could do more if they had the resources," says Mark Dimuantes, Senior Policy and Research Officer with Toronto's Municipal Licensing and Standards division, and Lead on its marijuana grow operations response strategy. He is one of several local government officials throughout Ontario now grappling with how best to carry out obligations that came into effect about 14 months ago through an amendment to the Municipal Act.
Municipalities are required to inspect a property and ensure public safety after receiving police notification that it has been used as a marijuana grow operation, but there is no harmonized procedure for doing so. Under Section 447.2 of the
Municipal Act, the inspections could be carried out by municipal by-law enforcement officers or other municipal employees, such as fire prevention officers or public health inspectors, who are responsible for enforcing municipal by-laws and/or provincial Acts or Regulations. Enforcement agencies have thus far taken varying approaches, relying on the authority in the Building Code Act, the Fire Protection and Prevention Act or municipal property standards by-laws.
The new responsibilities also bring new administrative costs, concerns about hazardous conditions municipal employees may encounter, and liability and financial encumbrances as municipalities involuntarily accumulate a portfolio of abandoned, derelict properties.
"In the east end of the city we now have a number of buildings sitting empty, and we've had to keep up the yard maintenance," Dimuantes reports. "The owners just walk away from them because they've taken enough money out of them and they've also done some serious damage. These properties have little or no equity in them."
Municipalities with rural areas can face further contamination headaches. "We have had cases where it is like a brownfield. If they dump all the chemicals and pollutants into the septic system, it destroys it. Then the septic tank has to be dug out and remediated," says Jim Jessop, a Fire Prevention Officer in the City of Niagara Falls.
In urban centres, grow operations in multi-residential buildings present other complications since a common air handling system could spread contaminants beyond the unit where grow operations occurred. Occupants of affected units may have to vacate the building at least temporarily, meaning lost revenue for landlords and displacement of tenants who may have difficulty finding comparably priced accommodations. Notably, Toronto Police shut down approximately 650 grow operations between January 1, 2005 and April 30, 2007, and about 40% of those were located in high-rise residential buildings.
ENFORCEMENT MODELS
The City of Hamilton recently unveiled a first-of-its-kind by-law specifically to prohibit grow operations and regulate the cleanup of properties where marijuana grow operations have been discovered. It sets out the City's authority to order actions at property owners' expense, and invokes fees for the municipal inspections and signoff on compliance documents that are part of the required process. If City Council approves the proposed by-law, two additional building inspectors will be hired to serve exclusively as grow operations specialists.
"Hamilton is sort of on the leading edge of creating a stand-alone marijuana grow op by-law," says John Lane, Manager of Building Inspections for the City of Hamilton. "When we looked at all the existing by-laws we had, none of them seemed to be a good fit for the grow op problem. Previously, we used the Property Standards By-law, but it didn't deal with what, on many occasions, was going on inside the building and what was going on inside the walls."
The Office of the Fire Marshal of Ontario recently established the Marijuana Grow Ops and Clandestine Drug Labs Unit and is developing a model protocol that municipalities could follow in dealing with the fallout from grow operations. The unit will also coordinate educational materials and training packages for frontline investigators and prosecutors such as police, fire and emergency medical services and municipal building officials.
Developers of the model protocol have been looking closely at the system in Niagara Falls, where a property is demolished at the owner's expense if the owner has not complied with municipal building orders within 90 days. This approach was jointly developed by the Niagara Regional Police, the Niagara Falls Fire Department and the City of Niagara Falls Building
Department and was already in place before the provincial legislation was enacted.
"When the Police shut down a grow operation, the Fire Department immediately conducts a fire safety inspection because there are always violations of the Fire Code in grow ops," Jim Jessop says. "The Chief Building Official then issues an unsafe building order and an order prohibiting occupancy against the building. We also register the unsafe building order against the title."
A slate of corrective actions is then required in response to the order - beginning with air quality testing and an environmental assessment of all rooms inside the building. Areas where the plants were housed must be stripped to the structural frame.
"If it vented into the attic, the attic has to be gutted," Jessop adds. "It's not just mould we are concerned about. It is insecticides, pesticides and fungicides. They can all enter into porous materials."
Electrical and gas inspections, blower door testing and duct cleaning are also required before the unsafe building order can be lifted. Overall cleanup costs have typically ranged from $75,000 to $100,000.
In Toronto, properties that have housed grow operations are secured within 24 hours of being shut down to prevent public access. The Municipal Licensing and Standards division then requires the property owners to obtain a series of technical reports and clearances - including an okay from an environmental consultant, a structural engineer and the Electrical Safety Authority - before an inspector will enter the premises.
This has been a way to safeguard inspectors' health and safety, but has also contributed to the growing number of properties that are simply abandoned without any mitigation of possible contamination inside. Dimuantes sees some advantages in both Hamilton's by-law and the Niagara Falls model.
"The Fire Department should really be the lead investigator," he maintains. "It has a 24-hour service, it has the HAZMAT suits and it has the enforcement powers."
Meanwhile, Hamilton's cost recovery approach sets a precedent that other Ontario municipalities are watching with interest. The proposed grow operations by-law would instigate two separate service fees for affected property owners - $545 for the building inspection and $495 for signoff on the certificate of compliance that shows the property meets the standards the Building Department has imposed.
At minimum, property owners will have to pay $1,040, but the $545 inspection fee will be charged every time inspectors must visit the property. "I think that will encourage people not to drag this process out," Lane predicts.
"The City of Toronto is heading down this path. We've been working on a cost recovery by-law as well," Dimuantes notes.
A proposed schedule of fees presented to Toronto's Licensing and Standards Committee in early September recommends fees of up to $7,665 per property. This would cover the staff time and costs for fire, police and legal services, building and public health inspections and services of the Municipal Licensing and Standards division.
RISK MANAGEMENT FOR PROPERTY OWNERS
For their part, residential landlords in Hamilton note that multi-residential rental units are taxed at a much higher rate than single-family homes or condominium units and they would like a commensurate police presence. "If they equalized the tax rate, then I don't mind paying this inspection fee," quips Arun Pathak, President of the Hamilton & District Apartment Association.
In 2006, Hamilton Police shut down 47 properties housing marijuana grow operations across the city. Three of those cases involved multi-unit properties encompassing a total of 49 separate units with grow operations.
"I understand this is a problem we don't want to have happening in our city. Some of our members have had problems with grow ops, and most of the time landlords have had no idea this was happening in their buildings," Pathak says. "The police need to find them and shut them down quickly and get the people running them behind bars so they aren't setting up more."
The heightened potential for fees, fines and onerous remediation costs underscores the importance of vigilance. Industry advocates remind residential landlords that Ontario's Residential Tenancies Act does allow them to inspect their properties regularly.
"It's an important message to large landlords, but for a lot of small landlords who might have one or two buildings, it's critical because this could wipe out their investment," advises Joe Hoffer, a Partner specializing in municipal and real estate law with London, Ontario based Cohen Highley Lawyers. "Obviously, municipalities feel they have the ability to pass these by-laws and reserve these powers to themselves and impose these sanctions on landlords. Whether that will stand up to judicial scrutiny, we'll have to wait and see, but landlords are better off to just do some due diligence rather than looking to the possibility of a future court challenge."
The logistics of regular inspections can be more difficult for owners/managers with large portfolios and/or buildings in distant locations. Since industrial tenants typically pay their own hydroelectric bills, industrial landlords are less likely to see evidence of the spikes in electricity consumption that are a sign of grow operations, and commercial/industrial landlords have also tended to place more emphasis on the tenant's right to quiet enjoyment of the lease.
"The reality is 99.9% of the people whom you deal with are on the up and up. Do you craft your lease to protect yourself against the 0.1%? You're going to have a 200-page document," muses Celia Hitch, a lawyer specializing in real estate and leasing with Lang Michener LLP.
She likens the situation somewhat to property owners who unwittingly do business with individuals or entities on the U.S. government's list of specially designated nationals under the USA PATRIOT Act. "How do you identify a terrorist? You could ask them to sign an affidavit attesting that they are not terrorists, but a true terrorist is probably going to lie in an affidavit. The same holds true for someone intent on criminal activity," she says.
Landlords could sue a tenant for damages, but, as municipalities saddled with contaminated former grow op properties are discovering, recovering costs is difficult. "Some of this might be insurable, but the threshold for insurance is that the damage has to be unforeseeable," Hitch adds.
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