News

Cannabis Farms Creating Huge Insurance Risks for Landlords

Monday, September 14th, 2009

A recent case in North Wales has highlighted how the growth of cannabis in rented accommodation can lead to huge damage claims for the owners of the property.

Police arrested 12 Vietnamese nationals who were growing cannabis in rented properties throughout the region, using illegal immigrants as workers. In many cases, cannabis was being grown in every room of the building, and severe damage had been caused by the addition of electricity and water supplies and the creation of ventilation shafts. The owners of the buildings were unaware of what they were being used for, or of the damage that had been inflicted on their property. The insurance company paid out over £100,000 to repair the damage caused in this case.

In most instances like this, however, insurers will refuse to pay out, citing reasons such as:-

• “This is not Malicious Damage because the alterations resulted from the Tenants undertaking an activity purely for their own financial gain and is therefore not Malicious towards the Landlord“
• “This is not payable because the damage arose out of an illegal or criminal activity“
• “We do not cover damage caused by a tenant who was renting the property“.

To avoid this happening, it is important that the wording of the insurance policy is understood by all parties right from the start.

Landlords should always be wary of tenants who are prepared to pay more than the going rate or pay rent in advance, and ensure they keep an eye on their property at all times.  It is prudent to rent through a responsible letting agent who has instructions to ensure that the property is visited regularly and is not being abused.  Again, this will depend on the actual arrangement you have with the Agent concerned.

Some insurers are also highlighting this growing problem and urging landlords to be vigilant. But what if you are a vigilant landlord, using a responsible letting agent, and a cannabis farm is discovered in one of your properties?  The damage will have already been done and it may already be too late to pursue a successful claim.

When arguing a case such as this, an insurance loss assessor can really help you to put a strong case forward to maximise your chances of a successful outcome.  If you are a landlord who has to claim for damage caused to your property, contact Truman Associates as quickly as possible.

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