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w w w . C A N A D I A N L a w y e r m a g . c o m A p r i l 2 0 1 4 23 attract any suspicion. Having said that, if a lender's suspicion should reasonably be aroused by anything in the loan applica- tion, then the lender must make further enquiry before approving the loan. In that circumstance I do not think a crimi- nal records check or tenant approval is extreme," says Goldberg. But as to whether forfeiture is a threat that will increasingly loom in the future depends upon how society responds to related issues. The B.C. Supreme Court in Nguyen imposed an obligation for lenders to consider the likely use to which properties may be used, which could lead to further similar situations. But Goldberg points out increasing legalization and institutionalization of marijuana grow operations could mean this will become less of a problem in the future, although their legalization will undoubtedly present other challenges to lenders. But the risk to lenders lies not in residential property alone — commer- cial property isn't immune. The lender involved in a former brewery unveiled by police to house the country's larg- est indoor marijuana grow operation in Barrie, Ont., was not seen as an innocent third party and was initially drawn into the hearing when the Crown sought for- feiture of the property, then listed it for sale at $10 million. In FirstOntario Credit Union Ltd. v. Her Majesty the Queen, the Crown failed in its attempt but the lender struggled with the owner as it sought to sell the property under power of sale. Legal costs alone through the lengthy ordeal exceeded $300,000 for the credit union. "As a lender's counsel, there are a number of things I would do," says Nor- man Kahn, a partner in Aird & Berlis LLP's real estate group. The natural thing to do is lay out what is expected of the property owner and have them acknowl- edge criminal behaviour on the property could be detrimental to the agreement. "We should make sure there are rep- resentations and warranties from the lender to the borrower about use." That should include a covenant about any future use of the property to ensure there is no illegal use, either by the owner or a tenant. On a commercial property the lend- er's interest can be significant, so inspec- tion of the property is key. But not just once, says Kahn. The lender should retain the right to conduct inspections on an ongoing basis over the term of the loan to ensure it is maintained and it retains its value as well as to discover any anomalies about its use early on. With the latest risk of forfeiture and threat of being drawn into any action involving the property, Kahn says there's another lesson. "It would be really important for the lender to show that they were actively dealing, as soon as possible, with illegal activity as soon as it arose. . . . Be diligent and make sure you keep carrying on those inspections." Typically the biggest risk is losing the property. The recent grow-op cases demonstrate the additional costs of legal fees and loss of interest along with the possible need to defend against complic- ity allegations are an additional threat against lenders. Dedication, knowledge and creativity. Henein Hutchison draws its power from experience and its talent from a team of rising stars. The fi rm's associate ranks include three clerks of the Supreme Court of Canada and one clerk of the Court of Appeal for Ontario. Experience and depth. More experience. More defence. | www.hhllp.ca E N O U G H TA L E N T TO F I L L A R O O M . Untitled-3 1 14-03-20 4:19 PM

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