Is your rental property actually a secret cannabis farm?

You may think that you have done everything correctly. Met prospective tenants, carried out referencing, they might have been there several years. But can you be sure your property investment is safe from cannabis farmers?

Recent reports show that 94% of cannabis farms (also known as factories or grows) are located in domestic premises. The problem has persisted for a while, with insurer Aviva reporting a 30% year-on-year increase in cannabis damage claims.

Growers are taking advantage of lenient penalties which say they won't be jailed if they are caught growing fewer than ten plants in a single house.  The activity is lucrative - growing nine plants can yield around £40,000 a year. 

The London Fire Brigade reports that fires in cannabis farms have doubled since 2010 leading to an average of one fire per fortnight; regionally that figure will increase so you can imagine that the number of these farms that go undiscovered run into hundreds of thousands.

The criminals think nothing of knocking down walls to install heating ducts; the property might well be a total loss and insurance may not apply.

Even if the property is still standing, the amateur work on re-cabling, knocking through walls to install any equipment that is needed, the use of copious amounts of water for irrigation, and a general lack of care or concern likely to be shown by the tenants in carrying out illegal activity, can all cause huge amounts of damage. You need to do all you can to prevent substantial financial losses.

Possible signs and checks for Landlords

• Gangs tend to adapt the premises - often by creating venting through floors or re-wiring - but this can easily go unnoticed as plenty of new tenants renovate properties.
•  Sealed door and windows. Doors and windows are sealed so the lights cannot be seen from outside – and to prevent the smell of the drugs escaping. In some cases a bay window is created,  with an overnight light or TV set up, so the premises looks normal - but actually it is just screened off, with cannabis plants lined up behind.
• A lack of furniture or personal possessions when you visit the property could be another sign. They will “stage” the flat for your inspection, but take the opportunity to open wardrobes and maybe see if all looks well.
• Is any strange ventilation at the property? If so, be suspicious.
• Look out for condensation on windows.
• Is there a pungent odour? The smell from a cannabis grow can be quite strong, even with ventilation. 
• Bright light - growers can't get away from the fact that internal farming requires a lot of it, with 2,000 watt lamps running 12 hours a day.
• Ask the neighbours to report anything suspicious, e.g. visitors at unusual times. Make sure they have your contact details.

Steps to protecting yourself

• Whilst agents reference, their level may not be sufficient – especially if you’ve had the same tenant for a few years when evidence of the right to rent didn’t apply, so referencing agencies may not have taken enough detail. We recommend doing due diligence yourself.
• Conduct thorough referencing and get a copy of a passport or driving license and a utility bill.
• Verify that the individuals exist on the electoral roll. If your suspicions are arisen trust your intuition. Far better to take a few weeks longer to find the right tenant than to have all of the aggravation of sorting this out if the worse happens.
• Check your keys still work in the door when you check the property– the farmers often change locks so that you can’t access the property.
• Visit regularly and keep a log of when you checked the property. Your insurance company will generally stipulate this in the wording.

It is not unusual for Insurers to turn down a claim if a landlord can’t prove they have visited the property regularly or failed to carry out sufficient background checks on tenants.

Insurance factors to check now

Imagine for a moment that you're facing a situation where the farmers vacate your property but leave a trail of destruction in their wake. 

 You will need to look at your policy wording, look out specifically for an illegal activities exclusion clause or a malicious damage exclusion or limitation.

Even as an unwitting victim of a cannabis gang, a farm situation is probably not going to be covered if one of these clauses apply, meaning you will be out of pocket. Unfortunately, there is no simple answer when it comes to an Insurance policy as much depends on the individual circumstances of a loss and whether a peril has been activated (i.e. fire etc.).

If you are lucky enough to have a policy that responds, the situation gets even more complex when the property is leasehold.

Not only will you be dealing with a claim on the contents that you have arranged, you will also have to be dealing with the Freeholders Insurers. So you may have to run two sets of claims at the same time; two lots of loss adjuster visits and all that the repair entails…

When deciding your sums insured you may have not opted for enough cover… check that the sum you’ve elected to insure covers things like tenants improvements, i.e. high specification bathrooms and kitchens, flooring.

It’s important to check what the Freeholder is responsible for insuring and what you are responsible for under the terms of the lease if it is a leasehold property.

You could find that they have made it your responsibility for insuring the internal cabling, the windows and a whole host of other items which you would normally regard as part of the building. Also, debris removal after a loss can run into thousands of pounds – who has that covered? You or the freeholder? It’s generally covered under the building section but don’t assume – get it verified in writing.

Ensure you know what is covered and speak to your Broker if you need to clarify anything.

The aftermath

You will spend a considerable amount of time trying to wade through the quagmire of what to do next.

From getting your keys back from the police when they have preserved the property as a crime scene, to paying to get a report from the fire brigade as to what has happened at your property, to getting power reconnected, to loss adjusters visits - if your Insurance responds.  Plus, the sheer amount of work in getting estimates for clearing up the property.

The stress of picking up the pieces will be exhausting, so take appropriate steps now. Prevention is far better than cure.