Steve Caswell
Broker
Realty Executives of Sudbury Ltd.
Unless you’ve been living under a Canadian Shield rock in Northern Ontario and are unaware of the huge news, on October 17th, 2018, Canada made the monumental transformation to become only the second country worldwide to legalize marijuana (aka. weed, cannabis, ganja, greens……). From coast to coast to coast, there was a diverse mix of celebration, angst, wonder and confusion. There are plenty of arguments as to cannabis’ benefits, lots of those out there who believe the prohibition was necessary and a massive amount of the population in the middle ground who realize the benefits of this legalization while still holding concerns over the usage and a plethora of confusion over what this all means to each of us individually and society as a whole.
This piece is not written to provide you with guidance on the best way to germinate your seeds or how to properly harvest, it will not get into the politics of who’s right and who’s wrong, this will not discuss health benefits or negative effects of smoking weed, and I will do my best to refrain from providing my own opinions in here as to whether or not the Cannabis Act is good or bad as a whole. Although those that know me well know where I stand!
Because we are real estate agents and this is a real estate blog, what this article will discuss is the implications of the Cannabis Act in relation to your present and future home ownership. It will not get into the rights and hazards of smoking indoors, but rather it focuses more on the cultivation side of things. It also discusses the major issues surrounding the implementation of the Act that, in my opinion, weren’t properly thought out and where mechanisms were missed to protect buyers and sellers with the largest investment they will probably make in their lifetime. And, on even a more micro scale, related to your home, camp and investment ownership in Greater Sudbury and surrounding areas.
As some background, the Act’s implementation, in a basic sense, was to legalize the use of marijuana nationwide. But, other than a few very basic elements, much of the structure and execution of the Act was downloaded to each province to create their own individual framework. So, for the purpose of this article and to assist our clients further, this article will be narrowed down to focus in on issues pertaining to the specific laws that Ontario has designed which you can CLICK HERE to access the basics of the legislation.
In Ontario, you have been granted the right to have up to four plants growing at anytime on your property, although you will notice some exceptions. This means, in general, you can install some lights, grab some pots and convert a closet, dedicate an entire room, put them on display for your neighbours in your living room window or plant them next to your tomatoes in the garden without any criminal repercussions. For the most part, this applies to tenants of rental units and condominium owners as well, although there may be exceptions based on individual tenancy agreements and condominium by-laws. If you fit in these parameters, check with your landlord, condominium corp. or even seek legal advice if necessary.
So, now that it’s legal, let’s grow some weed! It’s not illegal and no one can stop you! But, before you head off to the local gardening store for materials, here’s some items of major importance to consider regarding your home, apartment, camp, investment property or even vacant land you own.
Is it illegal to kick holes in your walls and rip your kitchen cabinet doors off? Absolutely not, but that doesn’t mean an appraiser will think of these remodels as value added to the property. Is it a criminal offence to not have a working bathroom fan that causes moisture build-up and potential mould issues? You certainly won’t end up in front of a judge for it, but a home inspector is going to report their concerns to the buyer about it. Is it against the Criminal Code of Canada to not have insurance on your property? No, but your mortgage company is going to demand their money back when they find out you don’t have it.
This new law has created MASSIVE gray areas and blind spots in our industry and we’re already seeing enormous problems arising due to the expedited way this law was passed. If you’re growing weed in your house, banks and insurance companies may still consider your home a “grow-op”. Appraisers, when coming in on behalf of a bank, have a fiduciary duty to report back to the bank if they see cannabis growing in the property. Home inspectors have a duty of care to the buyer to outline their concerns if they witness weed growing or evidence that it has been , including the horror stories we’ve all heard about potential for mould and “non-licenced” electrical modifications creating unsafe living conditions.
Personally, this is just my opinion, and not necessarily an opinion shared by my Caswell Team teammates, these 3rd parties to the purchase and sale of a home – namely insurance and mortgage lenders – are going to use these angles as huge money makers for themselves. If you’re buying a home where the seller states they have been growing weed legally indoors, it’s more than likely the banks and the insurance companies will increase your rates due to the “risks” involved or, even worse, flat out decline you for either or both. An increase of a ¼ point on a mortgage or 20% higher premiums on insurance, when pushed out over the term of the mortgage or over a decade of insurance, becomes an exponential amount of money out of your pocket and profits to line theirs.
As a seller, you’re thinking, “well, that’s the buyer’s problem, not mine,” but you couldn’t be more wrong. Once an appraisal of your home is in the system that mentions marijuana being grown in the property, it is registered for all lenders to see. Once a lender declines financing on a property due to this, other lenders will take note. Once an insurance company declines coverage, you, as the current owner, could be declined coverage. Once a home inspector reports that there might be mould growth or electrical issues due to the cultivation, they’re obligated to tell the next buyer they do an inspection for.
There are so many damaging possibilities to you as a seller that will quickly and adversely impact the value and saleability of your biggest investment. The problem – there are no mechanisms in the Cannabis Act, federally or provincially, to protect you from these 3rd parties taking these liberties at your expense. Ironically, none of this would surface if you disclosed you had four tomato plants growing in your kitchen. So why are they given free reign to take you to task on this? Because they’re using the gray areas and archaic mindsets to take advantage for profit and reduce the risks to shareholders.
“Thanks Caz – so I just won’t tell anyone!” is what you’re thinking. Sure, but that could land you in an even more expensive lawsuit. It is a seller’s responsibility to disclose any Latent Defects on a property. A Latent Defect is something that couldn’t be discovered reasonably through a standard inspection. If you had a closet in the basement quarantined for your plants with no ventilation then removed it before listing your home, you could still be held liable for not disclosing a potential, or actual, health hazard hidden behind the walls if the new occupants discover a problem. “But how would they know?” you’re thinking. Ever show your plants to a buddy or a neighbour? Ever post a pic on Instagram to show everyone how beautiful they are? You never know who is going to buy your house and who they are, or will become, friends with. What happens when the buyer goes to renovate that closet and finds the issues that have been causing their child’s asthma to act up?
So, moral of the story, unless you plan on never selling your house (laughable - Michelle and I said that 100 times in a seven-year span that saw us move five times!), buy a self contained moveable “grow box” or, even better, grow your weed outside. But, before you start tilling the garden, there’s one other issue to think about if you want to keep your plants!
In most real estate transactions, there are Chattels and Fixtures. Chattels are moveable items that aren’t attached to the property that the buyer and seller have agreed will remain with the property (ie. fridge, Rubbermaid™ shed, garage door remotes). Fixtures are anything that is attached to the property that the seller is going to remove and take with them (ie. dining room chandelier, the basketball net attached to the garage, tv mount for the flat screen). Plants are rooted into the property and, therefore, are part of the property and treated as “fixtures”. In order to take that tree you planted in Grandma’s honour or, in this case, your weed plants, it must be agreed upon IN WRITING on the offer. Guess who gets the offer when the buyer applies for financing….. you’ve just disclosed to the bank that marijuana is being cultivated on the property and you’ve circled back into the war chest of problems discussed above.
In full disclosure, we were as ignorant as everyone else when this law was passed. But we’re starting to deal with the full buffet of implications that are occurring. It’s like the governments put all parties involved in our industry into a Maserati™ that only goes full speed and pointed us into a snowstorm with white-out conditions. We’re all doing our best to navigate blindly through the system while doing everything we can to keep it on the road. The storm is slowly dissipating for us, but it’ll take some time to finally get onto a clear path moving forward.
Things will continue to evolve under this new world order in Northern Ontario and Canada as a whole. As your Realtors®, we’re deep in the trenches for all things related to your real estate needs, including this ever-changing legalization, and we’re here to help guide you through these fascinating new times with our expertise. But, for now, grab some 5-gallon pails to grow your plants outside and take them over to your mother-in-law’s before our photographer shows up and we list your property for sale!
Hope you enjoyed the read and never hesitate to contact us with any questions, comments and suggestions, including any other topics you’d like to see us discuss on here. You can reach us anytime through our team email account – caswellteam@realtyexecutives.com – and keep coming back to see what’s new and exciting in Greater Sudbury and definitely more updates as our experiences amplify around when the Cannabis Act comes into play in our industry!
Contributed by:
Steve Caswell
Cell - 705.561.8767
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact us immediately at caswellteam@realtyexecutives.com.
