Most tenants are simply looking for a safe place to live and somewhere they can call home. Occasionally, however, a property may be used for unlawful activities such as the manufacture of illegal drugs.
If a rental property you manage has been turned into an illegal drug lab whether a cannabis grow house or a meth lab, it can feel confronting and overwhelming.
There are several important steps to consider, including notifying the landlord, reporting the situation to police, and contacting the insurer to confirm coverage (just to name a few).
Handling these matters carefully helps protect both the property, coverage and everyone involved.
While this is relatively uncommon, it can occur, and there are often warning signs.
Keeping an eye out for unusual activity, particularly during routine inspections, can help identify issues early.
Potential signs of drug manufacturing
- Rent consistently paid in cash, particularly large amounts paid in advance
- Unusual or excessive security measures installed at the property
- Strong chemical odours or unusual vegetation smells
- Windows that are permanently covered, blacked out or heavily curtained
- Items resembling laboratory equipment, such as beakers, tubes or chemical containers
- Large containers connected with hoses or tubing
- Significant staining or chemical residue on benchtops and surfaces
- Hydroponic growing equipment or lighting setups
- Unexplained water damage or excessive condensation
- Constant background noise from equipment running
- Unusually high water or electricity usage, or unauthorised modifications to utilities systems.
Acting against illegal activity
If you suspect a property is being used to manufacture illegal drugs, it is important to act.
Drug labs breach the tenancy agreement and can cause significant damage to a property.
They also pose serious safety risks, including fire, explosion and chemical contamination.
If you have good reason to believe illegal activity is occurring:
- Collect whatever evidence you can to back your suspicions – take notes of conversations and photographs and video during property inspections.
- Report the matter to police for proper investigation and provide whatever assistance you can (make sure you get a police report if an insurance claim is likely)
- Notify your insurer of any illegal activity or suspicions, detail the actions you have taken and follow their advice
- In the case of drug labs or smoke houses, report the matter to health authorities too.
Tenants engaging in criminal activity can be subject to an urgent eviction in most states and territories.
The clean-up
When safe, landlords (or their representatives) are obliged under their insurance policy to take reasonable action to prevent further damage or loss.
That might be preventing further water damage in the case of indoor cannabis crops.
Meth labs or smoke houses can leave dangerous toxic residue and will need assessing by a government accredited agency, and possibly forensic cleaning.
Make sure you receive certification that the property is again safe.
Allowing a contaminated home to be occupied may be a breach of the residential tenancy laws in your state or territory, or even contravene building or health legislation.
If you need to make emergency repairs, EBM RentCover policyholders do not need prior approval, but you will need tax invoices to support any insurance claim you need to make.
For non-urgent repairs, take the advice of the insurer about obtaining quotes and organising repairs.
The insurer may want a loss adjuster to take a look, and the insurer will need to approve all non-urgent repairs before they are carried out.
Once the repairs have been made, it is time to submit your insurance claim.
Insurance implications
People involved in illegal activities rarely consider the damage they cause to a rental property, and the costs often far exceed the bond.
They may also abandon the property suddenly, leaving behind significant repair bills, unpaid rent, and extended periods before the property can be re-let.
Can landlord insurance ease the pain? The answer is: it depends. Policies vary, so landlords and agents should always read the Product Disclosure Statement (PDS) carefully.
Many landlord insurance policies exclude losses or claims arising from drug-related or other illegal activities. EBM RentCover is a little different.
Depending on the policy and subject to terms and conditions, policyholders may be able to claim up to $70,000 for drug-lab clean-up.
They may also be covered for damage caused by water or fire, as well as accidental, malicious, or intentional tenant damage, and theft.
Policyholders may also be able to claim for loss of rent if the property becomes uninhabitable, but coverage is generally not available for the temporary relocation of tenants.
Quick reminders
When tenants use a property for criminal activities, it can result in costly damage, serious safety risks, and significant stress for landlords and agents.
Stay alert for signs of illegal activity and act if you have reason to believe the law is being broken. Document any evidence, notify your insurer, and report the matter to the relevant authorities.
Got a question about cover? Contact the EBM RentCover team on 1800 661 662 or reach out to your Relationship Manager. Not a partner of EBM RentCover? Get in touch today.
