Must you disclose a home owned by a drug dealer?

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If you learn that your home was once owned by a drug dealer, must you disclose that to a potential buyer when you sell?

Donald and Jodi Dietrich bought a home in Winterbourne, Ont. in 2001. They were told by a neighbour several years later that an earlier owner was a drug dealer. In 2007, the Dietrichs contacted Waterloo Regional Police because they had heard that their property had been a grow house. The police told them there was no record of any grow op on the property.

They sold their home on January 31, 2010 to Mark and Elizabeth Leech for $655,000, with a $10,000 deposit. The deal was scheduled to close on May 14, 201. They did not say anything about the rumours, but before closing, the buyers also heard that a prior owner was a drug dealer.

The Leechs also went to the Waterloo Regional Police who told them the property had been identified as having a “clandestine or secret lab”. On March 29, 1995 a large quantity of hash oil was seized at the property although police did not find any grow operation or meth lab.

The Leechs wanted out of the deal. They argued that since the sellers must have known about this, they had a legal duty to disclose it and since they didn’t, the deal was off.

The Dietrichs claimed they knew nothing about a grow operation or meth lab, but the deal didn’t close. The Leechs sued for the return of their $10,000 deposit and the Dietrichs sued for damages suffered in not being able to close the deal, which came to $12,237.68.

In Small Claims Court, the Leechs submitted a March, 1995 newspaper article that suggested seven pounds of hash oil was seized, and a police report that said a room beneath the garage may have been at one time a hydroponic grow room. The police report suggested that charges were laid against several people as a result of that criminal investigation.

Deputy Judge Sebastien Winny of the Kitchener Small Claims Court determined on October 17, 2012 that a prior owner of the property manufactured some hash oil in the garage as a clandestine or secret laboratory. No evidence was provided that those activities caused any damage to the property. There was no proof of there having been any marijuana grow operation or meth lab on the property.

The judge also found that the sellers had no actual knowledge of anything related to the drug manufacturing except the rumour from the neighbour. The information the sellers received from the police suggested the rumour was false. There was no duty on the seller to disclose vague, unsubstantiated rumours.

As such, the judge held that the buyers had no legal justification for refusing to close, so the sellers were given all damages that they proved as a result of the buyers not closing, including extra rental costs and lost wages in dealing with the matter. If the sellers did have actual knowledge about a grow house op or meth lab on the property, they would have been required to disclose this information.

If you are thinking about buying a home that used to be a grow house operation, there may be damage caused by excess moisture. You will need to make sure the property has been remedied and certified by a company that provides these services. This could also require having the electrical system inspected and cleared by the Electrical Safety Authority. This will be the minimum required by any insurance company. Some companies that provide these services are Restoration Environmental Contractors Ltd. and Tri-Star Disaster  Recovery Inc.

Mark Weisleder is a Toronto real estate lawyer. Contact him at [email protected]

I can’t tell you how many times people assume any house will be disclosed if it was owned by a drug dealer at one time. It is imperative to know the facts, do your due diligence and research as much as possible to avoid any problems down the road. Some houses are not discovered by the local police and others don’t have any tell tale signs that it was a grow op until long after a new buyer has moved in. The lesson here is do your homework before you put in an offer.