Mortgage Broker

MORTGAGEBROKER mbabc.ca summer 2015 | 23 riskybusiness aer the MGO is removed and the property is remediated. e long-term reduction in value can be caused by the stigma of the property having been an MGO as well as lingering concerns as to mould and soil contamination caused by improper disposal of chemicals used in the cultivation process. Reduced marketability – e reduced valuation and history of a property as having housed an MGO can make it difficult for the property to be sold, either by the borrower or by the lender, in foreclosure proceedings at a high enough price to pay off the mortgage. Property Disclosure Statements – e reduced marketability of the property is increased by the fact the seller will, in most instances, be required to disclose to a prospective buyer the fact the property housed an MGO. While there is no legal requirement to provide a property disclosure statement, there is in most circumstances a practical requirement. e Multiple Listing Service, which is used by many realtors and owners to list real estate for sale, requires the seller to complete a disclosure statement. e disclosure statement includes on it the following: • Residential: Are you aware if the premises or property have been used as a marijuana grow operation or to manufacture illegal drugs? • Strata title: Are you aware if the unit has been used as a marijuana grow operation or to manufacture illegal drugs? A yes to either statement raises a red flag for any buyer and their lender. Not completing the form accurately and honestly can make the seller liable to the buyer for losses resulting from the misstatement. Registration as a contaminated site – e marketability of the property is made tremendously worse if the Ministry of Environment includes it on the registry of contaminated sites. Any property listed on the registry is subject to onerous procedures and the obtaining of Ministry approvals related to rezoning, dismantling of a building or decommissioning of the property. e result can be very significant delays, with cleanup costs generally ranging from thousands of dollars to hundreds of thousands of dollars. Even aer the cleanup is performed, the Ministry is entitled to keep the history of the property on the registry. Lenders reluctant to lend – Few lenders lend on the security of former MGOs and those who do tend to charge a significantly higher than otherwise available interest rate. is may make it difficult for the borrower to refinance the property so as to repay your mortgage. Amongst the reasons a lender might have for shying away from the deal is the reduced marketability of the security property in the event it needs to be sold to pay out the mortgage and the fact future lenders may be reluctant to refinance the property. Forfeiture of property – Your security may be at further risk because the presence of the MGO could give the government the right to confiscate the property under various statutes including the Criminal Code (if it is a proceed of crime), the Controlled Drugs and Substances Act (if it is offence-related property) and the BC Civil Forfeiture Act (if it is either a proceed of unlawful activity or an instrument of unlawful activity). While each of the forfeiture statutes has its own criteria triggering forfeiture, procedures to be followed, and standards of proof, there is a consistent thread that those with an interest in the property (where applicable, landlords/ owners and lenders) are protected if they did not have knowledge of the MGO and were not reckless or wilfully blind in not having the knowledge. is should cause borrowers and lenders to make it their business to do periodic inspections of the property and to be aware of indicators of an MGO. Indicators of a Marijuana Grow Operation Early detection and removal of an MGO can minimize risks associated with the mortgage security losing value. It can also help lenders make initial lending decisions and mortgage brokers to assist both borrowing and lending clients, particularly if there is the possibility of an MGO on the security property. What are some indicators of a property perhaps housing an MGO? No single indicator is proof of there being an MGO in a building; you will want to gather enough indicators which together indicate the presence of an MGO. e indicators provided in this article are not meant to be exhaustive and not every indicator will be present in every MGO. e indicators which might be present in a specific instance will largely depend on the size and production level of the MGO. Following are some to consider. Plants – e best indicator of an MGO is the presence of a number of marijuana plants. If you are fortunate enough to have access to the property and see a number of marijuana plants, in the absence of anything indicating the plants are being housed temporarily (such as while in transit), you have an MGO. If the plants are not there but you see ringed stains in a pattern, plants in pots may have been recently moved. Rentals and recent purchases – MGOs are most oen located in rented properties. ey are sometimes located in recently purchased properties where the buyer has been duped into allowing the house to be used for an MGO; by using someone else's property, the owner of the MGO does not suffer the financial consequences which occur from a property housing or having housed an MGO. Altered heating, lighting, irrigation and venting systems – Marijuana grows faster in a hot and damp environment. is is sometimes achieved by adding, modifying or improvising heating systems (such as adding portable heaters), lighting systems, (such as adding specialized lighting fixtures) and irrigation systems (oen created with PCV piping). e heat and light are sometimes further intensified by putting reflective foil on the interior surfaces (including the windows) of the house. e additional heat raises the humidity of the house and can cause it to "sweat". e additional moisture triggers the need for additional, modified or improvised venting. An MGO may have an unusually high number of vents on the roof and walls of the house, sometimes in unusual locations. Lights on for long periods of time – Marijuana seeds mature best when there is light around the clock. Aer about a month, the lighting time can be decreased to 12-14 hours a day. Moisture stains – e "sweat" can leave moisture stains on the exterior and interior surfaces of the house, particularly in the interior corners of rooms and by exterior vents. Tampered service metres – e high demand of MGOs for heat, lighting and water

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