Lockton REAC Comment: Midlands cannabis crisis causes headache for commercial property landlords26th June 2012

With the news last month that police uncover 21 new cannabis farms each day across the UK, the Association of Chief Police Officers (Acpo) report reveals that the West Midlands has the 6th highest level of cannabis factories in the country, with 25 for every 100,000 people.

In the last few weeks alone, factories have been discovered across the Midlands in commercial and residential properties, including in Smethwick, Wolverhampton, Brierly Hill, Dudley Wood and even in a mansion worth £2.1 million in Little Aston.

Most worrying for commercial property owners is the shift in the type of properties used as cannabis farms. Whereas before only very large warehouses were targets for growth facilities, organised crime syndicates are now shifting their gaze to setting up several small time cannabis farmers – known as gardeners – in smaller commercial spaces. This means the risk to landlords and their property has now spread significantly.

Chris Hitch, who heads up Lockton’s real estate and construction team in the Midlands, said: “We are extremely concerned about the rise in the discovery of these farms. Our biggest worry is for landlords with commercial premises on the outskirts of business districts as well as busy landlords managing several properties – as these are likely to be checked up on less regularly. In our opinion, there are several warning signs that landlords need to lookout for, including: would-be tenants offering cash up front for rent; previous businesses addresses not matching the company name; and mobile phone numbers only given as opposed to landlines. Landlords should also do a thorough background check on the company to ensure it does exist and ask for references from previous landlords if possible.

Not only are burglaries, robberies and violent offences in these farms rising sharply, cannabis growing can cause numerous other problems for landlords. Structural damage due to damp from 24 hour misting and watering systems; rewiring to provide constant heat and light; and fire risk due to wiring errors are high on the list of problems and are driving claims’ values higher.

Chris Hitch said: “If a landlord does have comprehensive insurance, then the damage done to a property used in this way is covered under that policy so repairs could be paid for. The landlord will have to ensure, though, that they can demonstrate that they took the appropriate steps required to manage the property effectively – including client vetting and property monitoring – and complied with all insurance requirements. Employing a letting agent to manage the tenant-vetting process and provide an inspection service on the landlord's behalf is a good option as insurers could refuse a claim if a landlord has been found to neglect their responsibilities."