The damaging legacy of illicit drug labs for property owners and tenants

Take-away

Grindal & Patrick have recently been involved in a number of cases involving former clandestine drug laboratories. The impact on the families involved has been immense.

Children living in former clandestine drug laboratories can absorb the same level of toxins as a regular methamphetamine user. The toxic brew of chemicals used to make the drugs seeps out of the walls and floors, and into the people who live there.

This creates real risks for residents and owners of properties. If you suspect that you live in a former drug lab, then you should take the matter seriously. Immediately seek professional assistance from a specialist in the area. 

Property owners with commercial and residential properties face different risks. At a minimum, they should ensure:

• That residential and retail premises are inspected in accordance with the lease, and inspections are conducted thoroughly;
• Where there is suspicion of clandestine drug activity, testing of the premises should occur before any new occupants take possession of it;
• Where a property is contaminated, that appropriate remediation of the property occurs in accordance with the Clandestine Drug Laboratory Remediation Guidelines; and
• That insurance policies are up to date.

 Introduction

Australia’s crystal methamphetamine (also known as “ice”) obsession is not slowing down. Alongside the devastating effects the drug has on users, the production of the drug is also leaving an invisible legacy in the places it was manufactured. This legacy places the building and its contents at risk of contamination, and possibly exposes unknowing future occupants to potential health risks from the residue chemicals. 

667 clandestine drug labs were detected in Australia in 2014-15, with 161 of those in Victoria.[1] The majority of those labs are operating from residential premises, with labs also having been detected in commercial or industrial buildings, rural properties and public locations.

Contamination commonly occurs in the structure of a property, such as the walls, frames and plumbing, and the toxic residue and gases may also transfer to contents like porous furniture and motorised equipment such as computers and appliances. Contamination is not always obvious once the illicit activities have ceased, so landlords need to ensure they comply with the inspection requirements prescribed in the leases. In some cases, contamination has been so bad that the property and its contents must be destroyed, and the occupants have unknowingly absorbed levels of methamphetamine that are equivalent to a low-level user of the drug. 

It follows that in such instances, the question will eventually be asked as to who must foot the bill for the damage. 

Landlords are liable to repair premises when they knew, or ought to have known, about the risk of contamination or damage

Property owners who intend to lease their premises are obliged to ensure that the property is fit for habitation where they knew, or ought to have known, of the risk of contamination.

Retail Leases Act 2003 (Vic) (RL Act)

Section 52 of the RL Act provides that landlords are responsible for maintaining the repair of the structure of the property, the fixtures, plant and equipment (such as air conditioning systems) and any appliances provided under the lease.  Where a property is potentially contaminated, then it may fall to the landlord to repair the property to its original condition where the risk of the damage ought to have been identified by the landlord. 

The Supreme Court of Victoria has confirmed where a landlord is reasonably aware of the contamination on its property at the commencement of the lease, it was liable for the damages and loss incurred by the contamination.[2] The same analysis will likely apply where there is contamination from a clandestine drug laboratory and the landlord ought to have been aware of the contamination.

Residential Tenancies Act 1997  (Vic) (RT Act)

In a residential setting, section 68 of the RT Act imposes a duty on a landlord to ensure that rented premises are maintained in good repair. 

The Supreme Court of Victoria has held that the landlord’s obligation under the RT Act to ensure that rental premises in good repair is absolute. An obligation is imposed on the landlord to identify and rectify any defects the landlord ought to be aware of at the commencement of the lease. [3] Again, a failure to do so may result in the landlord being found in breach of its duty to the tenant and liable for damages (including the remediation or replacement of the affected tenant’s belongings). Additionally, landlords will need to ensure the property is completely remediated before it is occupied again.

What should landlords do to ensure they do not fall foul of their obligations?

In both scenarios, it is prudent that the landlord’s inspections of the premises are thorough, and prompt consideration of complaints or reports from occupants or neighbours or any other factors that may lead to the conclusion of illicit activities should be carefully and quickly addressed.

Where a contamination risk is suspected, then a landlord should obtain expert advice from a bio-chemist regarding the scale of the contamination, and the appropriate remediation steps in accordance with the Clandestine Drug Laboratory Remediation Guidelines.

Landlords may be insured for all or part of the remediation, so it would be prudent to ensure the insurance policies are up to date.

Other liability

The nature of the contamination may also attract liability through other obligations:

• Where a landlord operates a business in part of the premises, that landlord may also be subject to relevant workplace health and safety regulations. 
• Where the property is being sold, vendors must have regard to their disclosure obligations under section 32 of the Sale of Land Act 1962 (Vic), particularly where a notice to remediate the property has been issued by the authorities.
• Where an injury has been sustained, a claim in personal injury may also arise. 

Conclusion

If you would like to discuss the above with us, then please feel free to contact Sam Grindal, Ben Patrick or Sophie Uhlhorn at Grindal & Patrick on (03) 8547 1047.

[1] EnHealth, ‘enHealth Guidance on: Clandestine Drug Laboratories and Public Health Risks’ (Report, EnHealth, January 2017).

[2] Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562.

[3] Shields v Deliopoulos [2016] VSC 500, [30].