Illegal cannabis farming is not an unknown risk to property owners. Historically, industrial units and remote warehouses have been the primary targets for this type of operation.
However, the decline of the UK high street has seen a growing trend of criminal gangs illegally occupying vacant retail and leisure premises, including shops, restaurants, nightclubs, cafes, and even bingo halls. This presents a significant risk for property owners – it’s not uncommon to see losses totalling hundreds of thousands of pounds.
Without adequate risk mitigation, property owners risk paying for damages and becoming embroiled in a criminal proceeding. Therefore, it is important that steps are taken to protect properties from criminal gangs, particularly if they are vacant.
The growing problem facing property owners
Following the Covid-19 pandemic, many retail stores struggled to keep their doors open, with Britain in general seeing 6,000 stores close between 2018 and 2023 (opens a new window). These empty stores have provided criminal gangs with a thriving environment in which to set up their operations.
Due to the rise of illegal cannabis cultivation in commercial premises, insurers have seen a notable increase in claims for damage to properties that have been converted into cannabis farms without the property owner’s knowledge. These claims highlight the myriad of risks an illegal cannabis operation presents to landlords.
Property owners could face significant costs as a result of falling victim to one of these operations, due to the expense incurred in repairing the subsequent damage. The increased need for heat and light to propagate the plants pushes criminals to tamper with electricity meter’s, exposing wires and increasing the risk of overheating and causing a fire. Also, the electricity theft is often hidden, increasing the risk of damage to neighbouring properties as firefighters will find it difficult to locate the source in the event of an electrical fire. Then there’s the risk of explosions, damp and mould, escape of water, and structural damage, as the criminal gangs will likely rip up the floorboards and walls to make room for specific machinery such as high intensity lighting. The repair cost is compounded by the clear up cost and loss of rental income while the property is being investigated, all of which can prove substantial.
Addressing the risk
It is vitally important that property owners mitigate the risk of illegal cannabis cultivation as much as possible, not least to be able to demonstrate to insurers that, in the event of a claim, they have done everything within their power to reduce the risk. Even if the cannabis farm is set up without the property owner’s knowledge and the correct steps aren’t taken, there is a risk that the owner may end up paying for the damage out of their own pocket and become part of a criminal investigation.
To minimise this risk as much as possible, below are a number of actions that can be undertaken in order to lessen the risk, and impact:
Frequently inspecting vacant buildings and looking out for the following signs:
Sharp rise in utility bills and tampering with electrical installations
Sudden bolstering of security measures and shuttered/obscured windows
Unusually high number of visitors (particularly during less sociable hours)
Snow melting much faster on the roof than neighbouring properties during winter months
Evidence of sub-letting
Tenants’ desire to pay rent months in advance, in cash
Keeping good relations with neighbouring businesses could help in the early reporting of any suspicious activity
When making an insurance claim landlords and property owners must demonstrate they have done as much as possible to prevent any damage. This includes evidencing that regular inspections took place and a four-point checklist (identity, address, credit check and employer reference).
Ensure that you have the correct cover for your risks. Reach out to our team to learn about the Lockton Asset policy which provides guidelines to mitigate risk in respect of vacant properties, covers unauthorised use of electricity, gas or water and can extend to specifically include cover for illegal cultivation of drugs.
For more information, please visit our Real Estate and Construction (opens a new window) page or contact your local Lockton representative.
