It looks like a three-alarm blaze in the heart of Toronto's Kensington Market Thursday night torched more than two homes.

During their investigation, Police found evidence of a marijuana grow-op in the basement of the home where the fire started. The century-old home is located on Fitzroy Terrace, near Kensington and Dundas Streets and was believed to be abandoned.

While at first local authorities and residents worried the fire could have been started by a serial arsonist that has been terrorizing Toronto neighbourhoods this past summer, it seems the fire was sparked by faulty electrical wiring.

Police accused whoever was running the operation of illegally rerouting electrical power from a neighbour's home.

"Our concern with grow-ops is fire. It's not a matter of 'if,' it's a matter of 'when' because when you are stealing electricity and distributing it in mass amounts, it's a recipe for disaster," said Staff Inspector Don Campbell, speaking to CTV Toronto.

Dangerous chemicals were also found at the home, authorities say, including concentrated hydrogen peroxide. Police speculated the chemicals could have been used to either enhance the grow-op or to venture into something else.

Police are approaching the chemicals with extreme caution. Hydrogen peroxide is extremely flammable and volatile, explained Det. Marcel Chiasson, an officer with 14 Division.

The chemicals only pose a threat to people when it comes into direct contact with them. It is not a threat to the neighbourhood.

If the fire broke out in the middle of the night when people were sleeping instead of early in the evening, the consequences could have been disastrous, police said.

Neighbours homeless, for now

Fire officials had a hard time reaching the burning building because it was tucked away in a narrow laneway behind stores and restaurants.

Nearly 100 firefighters fought for more than two hours to contain the massive blaze citing a lack of water in the area for the prolonged battle. Two aerial units, as well as several ground units, were used.

"The grow-op is in the basement of the house and so we have to approach it by excavation," said Chiasson, speaking to "It's too dangerous to approach because of the structure."

Conservative estimates of the damage caused to the building plus a neighbouring home is estimated at $400,000.

The neighbouring house was severely damaged by the fire, Chiasson said. It hasn't yet been determined if the house will have to be torn down but for now, its inhabitants are living elsewhere.

Police are still looking for the suspects believed to be responsible for the grow-op and fire. Chiasson said they have conflicting reports on who actually owns the home. He also said people could have used the home without being seen very easily considering its secluded location.

There is no word yet on how large the grow-op was or how much money it was worth.

With a report from CTV's Matet Nebres