Hey folks,

So, it’s been a few months since Cannabis was legalized in Canada, and recently Ontario opened up its first cannabis retail stores. As we have had some time to get used to the changes, I have found a number of clients coming to me with questions regarding cannabis and real estate.

Today, I will try and talk about a couple of common scenarios clients have asked about regarding cannabis and their properties.

1) Are people able to smoke/grow legal amounts of cannabis in their rental properties?

Yes, they are typically able to smoke/grow cannabis products in Rental properties within legal limits AS LONG AS the landlord does not have a no smoking or growing clause.

Be aware though, that if the smoking or growing of cannabis bothers a nearby tenant, the preexisting condominium/rental rules will make it easier for the smoker to be evicted.

Even if the person consuming/growing the cannabis is doing so for medical purposes, the landlord can require proof and for additional ventilation to be installed.

2) Does the use of Cannabis in my home affect its resale value?

It shouldn’t. As long as you aren’t operating a commercial grow up, and are consuming and growing within personal legal limits, your private consumption should not affect the value of your home.

PIPEDA (The Personal Information Protection and Electronic Documents Act) requires that the collection of personal and identifiable data is only limited to what you permit. Furthermore, PIPEDA’s identification of Cannabis related activity regards it as a PRIVATE matter, that can only be described in documents if it poses significant long term repercussions to the property.

Even in the process of your home being appraised, Appraisers are NOT allowed to take photos of Cannabis Activity or disclose said activity, as it is considered PRIVATE by PIPEDA.

The only thing the appraiser is allowed to note are the RESULTS of plant cultivation that can affect the property long term (Mold, Water Damage, etc)
The fine for breaching the disclosure of private activity through photo or document is over $100k.

3) Do realtors still need to disclose when a property was used to grow cannabis?

Yes, Realtors do need to disclose when a property was used as a “grow-op.” Withholding this information is considered “Withholding information on a latent defect.” (A latent defect is a defect that cannot be seen with ease.)

These former grow-ops are stigmatized for various reasons. First of which, is that the cultivation of plants indoors can lead to airborne issues within the home such as mould, water damage, or electrical issues.

Furthermore, the value of these properties is incredibly hard to project, as most lenders and banks don’t want to deal with Cannabis growth at the moment. We expect the major institutions to be using the next 3-5 years to determine their future operating practices under the new laws.

4) Are there no lenders who would even look at a former grow-op property?

Currently, there are very few, but as the effects of legalization take shape, we can expect that to slowly change.

As of now, in our Pocket Broker network, there are lenders who are willing to look at these types of stigmatized properties under certain conditions

1. The property is remediated and in acceptable condition to them.
2. They need to be provided with environment/air quality test reports conducted on the property, that meet their stringent standards.
3. They are provided documentation from the property’s municipality indicating that it is fit for occupancy.
4. That all borrowers receive independent legal advice acknowledging that the property was formerly a cannabis grow-op and any remediation work completed does NOT guarantee that the property will be free from future complications based on its former use.

 

We hope this post was able to help with someone of your questions or concerns. If you are considering purchasing a property that used to be a grow-op, we recommend giving us a call to help navigate the lending landscape.

Categories: Canada, Cannabis, Law, Mortgage Financing, Real Estate