Drugs and tenants are a worrying mix

Wednesday, 3rd Apr 2013


There have been a number of cases across the country involving drugs or drug labs being found in rental properties, which might have caused investors some concern.

Late last year in Adelaide, a tenant got in trouble with police after the photos used in a real estate ad showed cannabis being grown in two pot plants in the backyard of the house. One would have to assume that the property manager failed to either notice or identify the plants before placing the ad.

There was also a particularly worrying case in Melbourne more recently where the real estate agents themselves were charged with a number of drug-related offences after 25 rental properties they managed were allegedly used to grow hydroponic marijuana.

If you think it should be easy to spot a ‘drug house’, think again. In some cases the properties containing drug labs were actually found to be excellently maintained and even the gardens were in good shape.

One of the questions investors may be asking is regarding insurance. Are you covered by landlord’s insurance if your tenant is found to be illegally producing drugs in your property? It’s a bit of a grey area and something a policy holder should discuss directly with their provider.

But the issue isn’t necessarily to do with “damage” to a property. The clean-up costs involved in dismantling a drug lab can be significant even when there is technically no damage done to the property. Some polices may cover these costs, others won’t.

One thing is certain, that investors should take care when choosing a property management company. In particular, they should make sure the company has a thorough, rigid process for vetting prospective tenants and a policy of conducting regular inspections.

When it comes to the property management companies promoting ridiculously low fees, you have to question how many shortcuts they are taking when it comes to the tenant selection process or the management of your property.