Drug Labs in Rental Properties – what you need to look for….

 

Many people own an investment property, and these properties are generally simply unassuming private rental properties in residential areas – just the type that most tenants are looking for. Unfortunately, these are also the properties that organised crime gangs access for the set-up of their illicit drug labs. EBM RentCover published information on what to look for, which is invaluable information for both landlords and their managing agents. The core of the information in this newsletter is taken from the full article which can be accessed at https://www.rentcover.com.au/info-centre/could-you-be-managing-a-drug-lab. We suggest that you read this and distribute it to all of your property management team. This is not an advertisement for EBM RentCover, but it certainly highlights that not all landlord insurance policies are the same and it is essential that you as an agent remind your landlords to check their policies.

COVID-19 has presented a lot of challenges for landlords, with a moratorium on evictions for rent arrears, reduced rents, broken leases and higher vacancy rates. The pandemic has also thrown a spanner into the works for organised crime gangs who have found their international drug trafficking and domestic supply chain operations curtailed by border closures. This transport bottleneck has led to more clandestine labs being set up to manufacture drugs locally – and private rental properties are often targeted by gangs. With landlords facing a tough market, the temptation to scrimp on prospective tenant checks, to quickly secure rental income, can expose owners to the risk of turning over their investment property for use as a drug lab.

But even for the most diligent of landlords and their diligent agents, there is no fool-proof way to foresee a tenant turning a home into a drug lab. Organised crime is very adept at getting around normal screening protocols, like reference checks, and frequently uses ‘dummy’ prospective tenants to secure a lease. EBM RentCover, are obviously one of the providers of landlord insurance, who at the end of the day are left to cover the costs of removing and cleaning a property after it has been identified as a drug lab. Naturally, landlords need to have their landlord insurance in place to ensure that they are covered for such instances, which is where you as the agent need to remind your landlords that this is a possibility.

EMB RentCover in their article suggested that agents (landlords) need to watch for:

Before signing the lease agreement:

• Prospective tenants disinterested in the features of the property, like the kitchen, bedrooms, bathrooms, or surrounds such as proximity to public transport, schools and shopping (as the ‘cooks’ rarely live on the premises)
• Potential tenants willing to pay rent months in advance
• Rental applicants who attempt to avoid background checks
• Applicants willing to install extensive security at their own cost

During the tenancy, be alert for:

• Locks being changed without permission
• Installation of additional security systems, CCTV, window bars, guard dogs or deadbolts/alarms on internal doors
• Smoke detectors disconnected/removed
• Light bulbs removed (sparks can cause explosions)
• Curtains always drawn
• Complaints from neighbours about unusual behaviour, visitors to the property late at night, and suspicious comings and goings
• Tenants regularly avoiding/postponing/cancelling routine property inspections

If you suspect that a rental property is being used as a drug lab, do not attempt to enter the premises (booby-traps are not uncommon) or confront the tenants – call the police. If your suspicions are confirmed, get in touch with the property’s insurer to start the restoration process as soon as the police give the go-ahead.

Legislative requirements for evicting tenants vary in each state – some don’t require a notice period when a tenant has used the property for illegal purposes, whereas others require the tenant be given notice and time to remedy. Follow the right procedure in your jurisdiction and keep the insurance provider in the loop. Remember that the sooner the insurer knows of the incident, the more advice and support they can give to you as the agent representing the landlord.

The cost of repairing damage and remediating a contaminated home can stretch into the tens of thousands of dollars – and it’s a cost many landlords face alone. Often, landlord insurance policies exclude claims relating to drugs, whether it is a blanket exclusion or one related to a premises being used to generate income or used for illegal purposes. EBM RentCover is one of the few landlord insurance providers that protect a landlord’s investment property by covering drug lab clean-ups (up to $65,000 to cover damage to the building and contents caused by meth labs or hydroponic set-ups).

It is essential that you as an agent inform your landlords to check their landlord insurance policy to ensure that it includes coverage for claims relating to drugs.