Landlord Stripped of Property that Tenants Used as Grow House

A British Columbia landlord lost title to two of his three rental properties, because his tenants had used them as marijuana grow houses. This case may have relevance in Ontario as well, since this province has legislation similar to B.C.’s Civil Forfeiture Act, which permits the seizure of property that comprises either “proceeds of an unlawful activity” or “an instrument of unlawful activity”.  
In the B.C. case, the landlord owned three homes in Vancouver. He struck a deal with a friend:  she would take over the job of finding him tenants, and she could keep anything over $800 in rent per month per unit. The landlord did not screen tenants, nor did he inspect the premises during the terms of their leases.  In fact – and despite being an experienced landlord and investor – he did not even know the tenants’ names and never spoke or communicated with them. All tenants paid in cash, and the rents were never reported on the landlord’s income tax returns.
On this basis, the three homes were rented to tenants chosen by the landlord’s friend.However, the police were prompted to search the homes, and found marijuana grow operations consisting of more than 2,000 plants. The tenants were arrested but the landlord was not criminally charged; in fact it later came to light that several other houses owned by the landlord (and later demolished or sold) were also being used as grow houses. The landlord was never charged with any crime relating to those operations, either.
In connection with these three properties, the B.C. Director of Civil Forfeiture applied to the court to have the landlord’s rental receipts declared “proceeds of an unlawful activity”. It also wanted to have the grow houses designated as “instruments of an unlawful activity”. In his own defence, the landlord relied on a provision in the B.C. legislation stipulating that that an owner would escape liability if he or she did not “directly or indirectly engage” in the unlawful activity. He claimed that he had no actual knowledge of the grow houses, but admitted that such actual knowledge could have been readily available had he exercised some diligence. The friend whose role was to find tenants gave similar testimony.
The court agreed with the Director of Civil Forfeiture. It assessed the landlord’s evidence as lacking credibility, and was not swayed by his explanation for using the friend to find tenants when she had no prior experience in doing so. Instead, it found that the landlord had been “wilfully blind”: by using the friend as an intermediary, he could remain ignorant of how the properties were being used and could escape legal liability. For other rental properties that the landlord also owned, he had taken active steps to know the tenants’ names, and had collected the majority of the rent in person. The court found that the landlord’s lack of reporting the rental income on his tax returns was also telling.  
In the end, the court declared the full $24,000 in rent for the three properties to be the “proceeds of unlawful activity”, and ordered that amount forfeited.  Also, the landlord had $360,000 in equity in three of the houses he owned, and the court ordered that the landlord was to forfeit two of the three of them.
In Ontario – where the provincial Civil Remedies Act has similar provisions – this case serves as an important warning to landlords.

Landlords are strongly encouraged to screen potential tenants, and to actually check any references that are provided. Also, landlords should conduct regular visits to the property or hire a property manager.

See British Columbia (Director of Civil Forfeiture) v. Rai, 2011 (BCSC).