November 6, 2009 / 10:31 PM / 8 years ago

Canada grow-ops send home values up in smoke

TORONTO (Reuters) - Marijuana grow-ops are a huge industry in parts of Canada, creating health and safety risks and leaving both unknowing home buyers and mortgage lenders vulnerable to fraud, a conference heard on Friday.

Risks include the impact of fertilizers and pesticides used within closed-off spaces, as well dampness that eats away at walls. A buyer might not recognize a cosmetic touch-up job, only to face massive bills on a home that might even have to be torn down.

“You get the sense that it’s a pretty huge industry,” Len Garis, chief of the Surrey, British Columbia, fire department, told Reuters on the sidelines of a conference about mortgage fraud.

“After it’s busted, they walk away from it and the mortgage lender ends up holding the bag on it,” he said.

Official figures are in short supply about the number of grow-ops in Canada, but a recent Ontario police report said they had reached “epidemic proportions.” A British Columbia study estimated the Pacific Coast province had close to 20,000 grow-ops, many of them in homes carrying mortgages.

Panelists at the conference, which aimed to give lenders information and tips on what to look out for, said grow-ops could be worth hundreds of millions of dollars a year, and were just one of the fraud problems that lenders face.

Aware that that they are unlikely to be jailed for mortgage fraud, growers may simply cease operation to set up another lab, halting mortgage payments.

Mortgage lender AIG United Guaranty estimates that 10 percent of all mortgage applications in Canada contain some element of fraud, which results in more than C$1.5 billion ($1.4 billion) in losses.

The growers board up windows, remove walls and flooring and tamper with furnaces to boost carbon dioxide, as well as snaking electrical wires throughout the house to run high-intensity lamps.

This brings the risk of mold from excessive moisture, electrocution from unsafe rewiring, and fires from exposed live wires. And insecticides put poisonous chemicals in the air that can have serious health effects.

Officials in Surrey and Niagara Falls, Ontario, said they have used local legislation to close grow-ops that sprout up in their communities with strategies that include using fire and electrical safety inspections in the name of public safety.

“I‘m not going to have a three-year-old crawl around on the floor, or put her toys somewhere or sleep under ceiling tiles that are dripping with insecticide,” said Jim Jessop, deputy chief for Niagara Falls Fire Services.

“There’s nothing out there that tells us what we have to do. That, from your position, should scare the heck out of you,” he told the audience of mortgage lenders.

($1=$1.08 Canadian)

Reporting by Ka Yan Ng; editing by Janet Guttsman

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