{"id":15470,"date":"2018-04-16T01:00:36","date_gmt":"2018-04-16T05:00:36","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=15470"},"modified":"2023-06-16T11:32:05","modified_gmt":"2023-06-16T15:32:05","slug":"what-homeowners-must-know-about-marijuana-legalization","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/what-homeowners-must-know-about-marijuana-legalization\/","title":{"rendered":"A Home-Grown Conundrum: What Homeowners Must Know About Marijuana Legalization"},"content":{"rendered":"

Under new federal legislation, as of October 17, 2018, Canadians will be able to grow up to four marijuana plants in their private residence – but a lack of protections and awareness could cost them thousands – or even their mortgage.<\/h4>\n

Mary*, a 30-year-old condo resident in Toronto\u2019s popular CityPlace community, has had enough.<\/p>\n

Each day, at the stroke of 4 p.m., her floor fills with the pungent odour of marijuana smoke; it\u2019s strong enough to permeate her unit, located all the way at the end of the hall. Just as frustrating, she says, is the constant onslaught of burnt joints raining upon her balcony.<\/p>\n

\u201cWe\u2019ve notified management, nothing has been done,\u201d she says, her exasperation evident. \u201cI mean, they\u2019ve sent emails and posted things in the elevator, but we\u2019re still getting these disgusting things thrown onto our balcony.\u201d<\/p>\n

Her concerns of second-hand smoke and the potential impact on her unit\u2019s value are only growing, however, as federal legislation to legalize marijuana looms. With use already so prevalent in her building, where she has lived for four years, she dreads that her neighbours will soon be allowed to cultivate their own home-grown pot.<\/p>\n

\u201cIf they start growing the plants on day one, I\u2019m out, because I don\u2019t think our neighbourhood should have to tolerate this,\u201d she says. \u201cWe have a lot of young professionals, a lot of young families. I don\u2019t see this is the right time or place to be promoting growing or smoking in the home.\u201d<\/p>\n

Mary\u2019s just one of the 1.6 million condo dwellers who will be impacted when Bill C-45 \u2013 the Cannabis Act \u2013 is passed into law on October 17, 2018. While the particulars of how the drug is distributed and used will fall to the individual provinces, federal law states Canadians will be able to smoke, eat or vape pot in their homes, as well as grow up to four plants per household.<\/p>\n

While the complications of smoking weed in condos have been hotly reported, less notice has been given to the presence of plants in private residences \u2013 and it\u2019s actually the increase of these indoor grow-ops that most concern the real estate industry. Experts say everyone, from buyers and sellers, to agents, to home inspectors, will be affected.<\/p>\n

Related read: What Legal Pot Means for Renters and Condo Owners<\/a><\/strong><\/p>\n

Home Grown Issues<\/h2>\n

The problem is the definition of a grow-op is, well, hazy. With no legal benchmark, any home where marijuana is grown \u2013 be it a single potted plant, or large-scale operation – can be stigmatized the same way. The humidity and power required to grow a large crop can lead to mould and tampered electrical systems \u2013 but evidence of this damage isn\u2019t required to label a home a \u201cgrow-op\u201d.<\/p>\n

Once stigmatized, it can be very difficult to wipe the slate clean; remediation standards \u2013 a process that would indicate what repairs a former grow site would need before it\u2019s deemed safe \u2013 don\u2019t yet exist.<\/p>\n

And grow-op status comes with real consequences; insurers and mortgage lenders generally want no part of a home where marijuana has been grown. This can result in issues ranging from home insurance coverage gaps, to difficulties selling the home or even getting a mortgage.<\/p>\n

Related Read: What Buyers Should Know About Former Grow-Op Houses<\/a><\/strong><\/p>\n

Growing Marijuana Could Risk Your Mortgage<\/h2>\n

Mike Bricknell, a mortgage broker at CanWise Financial, says lenders take a very conservative approach with homes where growth has been present. Most \u201cA\u201d banks will deny the mortgage altogether, requiring borrowers to turn to alternative lenders, which still require considerable legwork to clear the home for financing.<\/p>\n

\u201cSo far, any trace of a \u2018grow op\u2019, legal or not legal, past or present, is not to be considered approvable by a conventional residential lender,\u201d he says. \u201cFor the unconventional lenders it takes a lot of paperwork, air and mould testing, and case-by-case exceptions to obtain a mortgage and home insurance approval.\u201d<\/p>\n

\u201cMost Insurers Want Nothing to Do With It\u201d<\/h2>\n

This can be further complicated if the home\u2019s status makes it hard to insure. \u201cLenders technically own a home until a borrower pays off the mortgage,\u201d Bricknell says. \u201cA home must have home fire insurance, so if the insurance companies are not approving a home insurance policy, then by default the lenders will not approve a borrower\u2019s mortgage on that particular home in the first place.\u201d<\/p>\n

It\u2019s not yet clear whether insurers will adjust these strict criteria post-legalization, and whether those who grow within the legal limit are risking their home coverage.<\/p>\n

Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada, says the insurance industry is closely monitoring the issue, but it\u2019s challenging as no specific legislation has been introduced. \u201cLike everyone, we\u2019re operating in a vacuum in regards to the details,\u201d he says, adding that insurers will have to review their policy wordings once legalization occurs.<\/p>\n

Because insurance is a competitive marketplace, he says, some insurers may introduce policies that allow for home growing, while others will not, and stresses those who plan to grow at home should review their policies in depth.<\/p>\n

\u201cOnce the legislation is introduced and passed, it makes sense that any homeowner sits down and contacts their insurance representative and makes sure what they have makes sense for them in coverages,\u201d he says.<\/p>\n

A Legal Grey Area<\/h2>\n

Real estate and insurance lawyers, though, are bracing for the influx of confused homeowners and policy holders.<\/p>\n

\u201cWhat\u2019s going to happen is, you\u2019re going to have scenarios where the insureds are going to have losses, because of the use of marijuana grow-ops. They\u2019re going to make the claim, the insurers are going to say, \u2018well, we don\u2019t cover that\u2019, and the insureds are going to say, \u2018But I have a license, it\u2019s legal now. The law allows me to have one (plant),\u2019\u201d says Steven Wallace, partner at BC-based Dolden, Wallace, Folick LLP.<\/p>\n

\u201cMost of the exclusions refer to it as an illegal act. So if it\u2019s not illegal, I think the insurance companies need to start asking more questions at time of the application stage \u2013 \u2018Do you plan on growing marijuana in your home?\u2019 Because then they\u2019re going to have to start deciding, are they going to charge more? But most insurers right now really want nothing to do with it.\u201d<\/p>\n

Bob Aaron, a partner at Aaron & Aaron Barristers and Solicitors who specializes in real estate law, says while it\u2019s unlikely that there will be a dramatic uptick in home growers, fallout will occur.<\/p>\n

\u201cI think there\u2019s going to be a fair bit of litigation when it becomes legal,\u201d he says. \u201cBut I don\u2019t think that suddenly when it becomes legal, there\u2019s going to be a statistically significant increase in the use of marijuana, of people saying, \u2018Well, it was illegal on June 30 and now it\u2019s July 1, and I\u2019m going to go out and get some and try it.\u2019 I think the people who\u2019ve wanted to try it have already done it.\u201d<\/p>\n

Survey data collected by Zoocasa<\/a> on Canadian home buyer sentiments find that while there is some interest in home pot cultivation, it\u2019s not widespread; 53 per cent of respondents indicated they \u201cstrongly disagreed\u201d they would consider growing pot at home post-legalization, while only 8 per cent said they \u201cstrongly agreed\u201d. However, 47 per cent stated they would be less likely to purchase a home if marijuana had been grown there, while 39 per cent believe increased usage inside a home would decrease its value.<\/p>\n

Real Estate Industry Seeks Clarity, Protections<\/h2>\n

There are also significant challenges for those who work in real estate; as more homes become grow sites, realtors must do their due diligence to disclose them. That\u2019s not always an easy task, especially as it\u2019s left out of the federal framework altogether says Pierre Leduc, spokesperson for the Canadian Real Estate Association.<\/p>\n

\u201cThe federal legislation does not discuss or frame disclosure with regards to cannabis cultivation in the home. Our understanding is that there would be no requirement to disclose that cannabis was grown in a home, just as there is no legal requirement to disclose a homeowner cultivated geraniums or other living plants indoors,\u201d he stated in an emailed response to Zoocasa.<\/p>\n

\u201cFurther complicating the issue is that trade in real estate is provincially regulated, so our expectation is that provinces and their regulators will be the ones to implement new regulations or clarify and expand existing regulations as concerns disclosure requirements and home cultivation of cannabis.\u201d<\/p>\n

The Ontario Real Estate Association has recently moved to do just that, unveiling on April 9th<\/sup> a five-point plan to protect homeowners, and to better clarify the process for residential grow-ops.<\/p>\n

Their proposal, titled \u201c<\/em>Protecting Ontario Homes: OREA\u2019s Action Plan for Cannabis Legalization<\/em><\/a>\u201d<\/em>, urges the provincial government to:<\/p>\n