Selling a home where there’s been drug activity can be problematic for any real estate agent. There are potential safety issues for you, your team, and prospective buyers when you’re showing the home. There’s also the possibility of a lawsuit if a buyer is unaware of the drug activity and finds out after purchasing. So, what should you look out for when dealing with homes where drug activity has occurred?
One of the top reasons for lawsuits in the real estate industry is disclosure issues. Disclosure laws differ across states, and real estate agents need to be aware of their obligations to disclose any information which can materially affect the value of a property.
In about half the states in the US, sellers are bound to disclose whether a property has been used as a meth lab and/or where there’s a risk of meth exposure. This includes California. You can find out more about meth lab cleanup requirements in California here.
Selling a property that’s been used for the cultivation, manufacturing of, or distribution of marijuana also requires disclosure, if the real estate agent or broker is aware of the activity. You can read more about disclosures regarding cannabis when buying, selling, or renting (in California). California is somewhat of a pioneer in this area. and real estate agents should ensure they’re aware of the evolving legal landscape.
As with all disclosures, you can only reasonably disclose if you know about drug activity at the property. But, as a real estate professional, you’re expected to do a visual inspection. To protect yourself and your business, be on the lookout for any red flags. You’re not required to undertake a building inspection or any further investigations about the property. But you must disclose what you know and, if you’re the buyer’s agent, you should suggest to your clients to undertake thorough due diligence before purchasing.
Telltale Signs of Illegal Drug Activity
When you’re doing your visual inspections of a property, be on the lookout for these telltale signs of potential drug activity:
Evidence of excessive use of chemicals
Fire damage within the home
Wall and carpet staining – much more than the usual “wear and tear” expected in a property
Hydroponics setup inside the home
Disconnected fire or smoke detectors
Unsanitary conditions and excessive rubbish can also be a telltale sign. But it’s important to recognize that not all messy homes are necessarily meth labs or drug operations!
In extreme cases, you may also experience symptoms when visually inspecting a property affected by drugs — particularly if the property has high meth levels contained within it. If you have breathing issues, a metallic taste in your mouth, itchy eyes or throat, leave the property immediately and seek medical attention.
The United States Drug Enforcement Administration (DEA) provides a publicly available online resource called the National Clandestine Laboratory Register. This comprehensive database contains information about meth-related properties across the country. If you’re suspicious about a property on your books, you can access the database here.
The Impact of Drug Activity on a Property
Common issues relating to properties where drug activity has occurred include:
Problems with mold as a result of increased levels of humidity
Toxic fumes in the HVAC, walls and/or carpet
Electrical issues (where unlicensed electrical work has been done)
High fire danger and risk of explosions
Issues relating to smoke and strong odors
These problems can cause serious health issues, and remediation to standards that would allow the home to be inhabited can be expensive. Costs vary depending on the type of drug activity and scale of the operation.
Keeping Yourself, Your Team and Prospects Safe
When dealing with properties where drug activity has occurred, it’s important to keep yourself, your team and prospects safe. In the case of meth-related properties, California has strict health and safety laws to protect people. Remediation of the property may need to be undertaken before anyone is allowed to reside in the property and health issues could ensue for anyone who enters a property without suitable protection. Certainly, this makes open showings untenable until appropriate action has been taken to remediate the home.
In other cases of drug activity, it’s still worth being cautious when undertaking any open houses. Sometimes these affected properties are in undesirable areas or are frequented by criminal elements — particularly if the last residents left in a hurry!
What to Do If You Are Faced With a Lawsuit
If you’re selling a property with previous drug activity, you could face a lawsuit for failure to disclose materially important information, breach of duty or negligence. Some potential scenarios where this might occur include:
When a purchaser realizes after the sale that there was drug activity in the property, and they now face hefty remediation costs
Where hazardous fumes or chemicals have caused a health issue for new property owners
Where you’ve said something (seemingly innocently) such as “The neighbors are great,” and the new residents find out they’re living next to a meth lab
Even in situations where you honestly didn’t know about the drug activity at a property, you can still find yourself facing a lawsuit. You may need to defend your case in court. Lawsuits can be costly, whether you’re an innocent party or not.
As a real estate agent, PREVENTION is what you should focus on, so you can prevent issues BEFORE they become lawsuits. That means:
Knowing your disclosure responsibilities
Good record-keeping of all communications with clients and prospects
Adequate insurance in case things go wrong
Insurance Protection for Real Estate Professionals
To make sure your real estate business is protected against lawsuits, contact CRES for an insurance check-up. For more than 20 years, CRES has been among California’s leading real estate insurance experts.
We can tailor an insurance package to suit the needs of your real estate office.
As an added benefit, with CRES E&O + ClaimPrevent®, you’ll also have access to professional legal assistance from experienced and qualified attorneys 7 days a week. For more information, contact the CRES team on 800-880-2747 for a confidential discussion.
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.
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