Q: We are representing a Buyer. We just got the Seller’s Disclosures and learned that the prior tenants had been using the house to grow marijuana – no further information was provided. How should we advise the Buyer? Do you have a standard form?
A: Notwithstanding the efforts in California to legalize marijuana (cannabis), growing marijuana indoors can create significant problems both environmentally and structurally. This particular crop requires a great deal of water and excessive moisture can lead to issues such as mold and other damage. Depending upon how elaborate the procedures used to grow marijuana inside a structure, modifications may have been made to the plumbing and electrical systems. Thus, growing marijuana inside a structure is a material fact that should be disclosed and Buyers should be warned about the potential dangers.
Whenever a Seller, Seller’s Agent or anyone else (such as the nosy neighbor) discloses, hints at, or opines that the structure is being used as, has been used as, or may have been used as, a “grow house,” it is important to document that you have warned the Buyers of the potential harm and followed the tried and true formula of “ADD” – that is to say, document precisely who made the disclosure (Attribute), state what information was revealed (Disclose) and then make it clear that you are not investigating the alleged use of the Property as a Grow House (Disclaim) and/or any of the potential problems, which should be followed up with recommendations for the Buyers to investigate.
PRACTICE TIPS
1. Whether you represent the Buyer or the Seller, disclose whatever you have been told about the Property being used as a “Grow House.”
2. It is not your obligation to investigate the validity of any claims made about the Property. Regardless of whether you receive information orally or in writing, you should Attribute the information to the source that provided it, Disclose the information succinctly and Disclaim any knowledge of the issue and that you will not investigate or verify that information.
3. Because of the extensive, potential problems that may develop if the interior of a structure is, or has been used as, a “grow house,” we recommend using the Marijuana Grow House Disclosure and Advisory which follows below. The first paragraph is the “disclosure” which can be tailored to fit the specific circumstances of the transaction.
4. The Disclosure and Advisory should be provided as soon as practical to the Buyer along with the Agent’s other disclosures. The form can also be used as an Addendum to the Agent’s AVID.
This Weekly Practice Tip is an attorney-client privileged document for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright 2019 Broker Risk Management 02/08/19
MARIJUANA GROW HOUSE
DISCLOSURE AND ADVISORY
PROPERTY: _______________________________________________________
The Seller of the Property has disclosed that [or, state the name of person other than Seller who has claimed that] the Property [insert either: is, may have been used as or has been used as] a marijuana “grow house.” Broker and Agent will not investigate or otherwise verify whether or not the Property has ever been used as a grow house nor the extent to which the Property was used for that purpose.
A Property used as a “grow house” may contain multiple hidden problems including, but not limited to, environmental hazards (including mold and/or other contaminants), defects in construction, and/or repair. The defects, environmental hazards and contamination in this Property have not, and will not, be investigated by Broker and its Agents, thus it is unknown to what extent the Property has been fully repaired or remedied. If there are environmental hazards at the Property, these could be harmful to the Buyers and/or others; modifications made to the Property may affect the structural integrity and/or use of the Property.
The actual cost of complete remediation may exceed any estimate(s) that have been obtained by the Sellers. Buyers are strongly encouraged to request copies of all documents in the Seller’s possession regarding what work was, and what work was not, done to remedy the problems created by the Tenant’s use of the Property as a grow house. Any future or further attempts at remediation of the Property may or may not be successful.
Broker and its Agents make no representations as to the actual condition of the Property in view of its use and will not verify or further investigate the information supplied by third parties; Buyer should investigate. Buyers should not rely on any representations or information supplied by the sellers or anyone else in their decision to go forward with the purchase of the Property.
Buyers are again strongly advised to obtain all environmental and structural inspections necessary to determine for themselves the actual condition of the Property. Failure to do so is against the advice and recommendation of Broker and its Agents.
If Buyers choose to proceed with the purchase of the Property, they are doing so at their own risk and against the advice of Broker.
The undersigned Buyers understand, acknowledge and agree that it is their obligation to investigate the potential problems detailed above and that they are not relying on Broker and its Agents to determine whether or not it is in the Buyers’ best interests to acquire the Property.
Buyer: _________________________ Date:_____________
Buyer: _________________________ Date:_____________