Cannabis Act Impact on Canadian Real Estate
What does the new Cannabis Act mean for Buyers, Sellers, Tenants & Landlords
The new Cannabis Act became law on October 17, 2018. There are questions and concerns from many people, not just from a health and safety perspective, but also around its direct or indirect implications on real estate and property management. Here are two informative pieces that shed some light on the issues at hand. Mark Weisleder is a well-known real estate lawyer and he shares with us the 5 things we need to know about the new Cannabis Act. The other is an educational piece from thestar.com that presents (and busts) some commonly held myths about cannabis consumption.
Our two cents: As Buyers, Sellers, Landlords, Tenants and real estate professionals, we all need to make an effort to keep ourselves informed about the basic rules and rights around Cannabis. For landlords, it becomes important to also be aware of any specific regulations for example from condominium boards, for things like marijuana smoking in condos, or growing and selling cannabis. With time, there will be clearer micro-level rules and better understanding, and perhaps even tightening or enforcement of new rules, to ensure not just personal safety, but also to ensure that there is no misuse and that homes, condos and other properties remain in good condition. Right now however, there are some grey areas and the video below aims to highlight top 5 things around recreational marijuana or cannabis use from a real estate perspective.
Here are some concerns that will have to be addressed by the industry:
Mortgage Rules & Policies around homes used for grow-ops:
We still don’t know if mortgage lenders and insurers are open to changing their policies for homes used for grow-ops – that is anytime a plant or more was found growing in a home. The reason for this is not just whether growing pot was illegal or growing four plants is now legal, but simply because growing pot can wreak havoc on a home’s structural foundation.
Saleability of a Home due to cannabis production or smoking:
The smell from cannabis smoking or production, like any other unpleasant odours from cigarette smoking, pets, general unhygienic or unclean conditions will impact saleability of a property. With legalization, pot smokers will not try to hide or confine their habit anymore, and the smell may permeate into each room of the house. Other than sensory unpleasantness from the smell of smoke, there may be some cosmetic damage caused to the property due to damage from humidity and ventilation issues. This can lead to selling the property below market potential, and likely with higher number days on market.
Buyers will have to follow a stringent inspection process, starting with an upfront disclosure question of whether marijuana has been grown in the property and where specifically in the home it was. The seller does not have to voluntarily offer that information. A buyer needs to ask the question.
Impact on Value of Homes near a cannabis retail outlet:
While we can’t say for sure, but it is possible that proximity of cannabis outlet can affect home prices. Cannabis stores need to be a certain distance from schools and parks. and proximity to top schools drives up housing values. This could mean that homes near popular schools will see greater price appreciation than other homes. It will be interesting to see how Markham real estate values hold up as compared to Metro Toronto. Markham has banned any cannabis store within its city boundaries. If real estate values start to escalate, then the market has spoken and it’s telling us that cannabis stores are bad for property values. While cities are being really careful in terms of where they’re allowing these locations to pop up, zoning bylaws can change at any time. End of the day, some people are going to care and some not so much about living in close proximity to a cannabis retail outlet. In due course of time, statistics and trends will become available to better understand the short-term and long-term effects of cannabis on local and provincial Real Estate markets.
Cannabis Act Impact on Canadian Real Estate – Here are 5 things you need to know:
How much Cannabis can be grown legally in a residence?
Four Cannabis plants may be grown in each residence. This includes apartment or condominium units. Under Federal legislation, this could also include an outside garden that is part of a home. The Provinces will each determine whether to permit this outside growing.
Will there be any standards as to what constitutes “safe” growing of Cannabis?
Right now there do not appear to be any regulations in place. You will undoubtedly see “tool kits” or “indoor tents” being marketed for this purpose, with marketing claiming that this will not create mold behind the walls, for example. Still, professional electricians will likely be required for this, including preparing proper ventilation from the plants to the outside, as additional protection against mold.
Should a seller and real estate agent disclose the past existence of Cannabis plants on the property, if it is legal?
In my opinion this will be an issue as to whether it can be classified as a material latent defect, which would have to be disclosed. Since mold behind the walls that the seller knows about could satisfy this test, there will likely be litigation when it is not disclosed and problems arise after closing.
Can you stop a tenant from smoking Cannabis or growing cannabis plants?
Even though it is legal, you can include a clause in a lease to stop any tenant from smoking or growing Cannabis on the premises. This should be inserted into every lease. If the tenant then smokes, it will be easier to evict them. While medical Cannabis users may raise human rights issues, it is still better to have this clause in the lease right from the start to have a defence.
What will condominiums do to stop Cannabis from being smoked or grown?
Some condominiums are already passing rules to stop any kind of smoking, whether cigarettes or Cannabis and growing of any Cannabis Plant. Others may set aside an area of the building for users, or just for medical Cannabis users. Others may just wait and see and attempt to rely on provisions in Condominium Law that you cannot commit a nuisance to your neighbours. Then, if the smoking is bothering your neighbours, they can bring action to get you to stop.
Source Credit: Mark Weisleder Real Estate Lawyers
Here are some of the most commonly held myths about cannabis
Medicinal cannabis has been legal since 2001 with the number of medical users skyrocketing recently, and this week recreational cannabis has become legal nationwide. Contrary to popular notion, there are risks associated with using cannabis. As legalization takes effect across Canada, the public should be aware of the facts (and fictions) about cannabis.
Here are some of the most commonly held myths about cannabis.
Cannabis is largely harmless.
FALSE. There are well-established risks of cannabis use, such as impaired motor coordination that can lead to accidents, chronic bronchitis from smoke exposure, and increased risk of psychotic disorders. Just because it’s legal doesn’t mean it’s safe.
Cannabis is not addictive
FALSE. Cannabis is an addictive drug and cannabis use disorder is an accepted psychiatric diagnosis while it is true that the rates of addiction are lower than for a number of other drugs.
Cannabis isn’t physically addictive
FALSE. Cannabis can be both psychologically and physically addictive. Like most psychoactive drugs, the frequent use of cannabis leads to adaptive changes in the brain. This leads to physical dependence on cannabis to sustain equilibrium.
You can’t overdose on cannabis
FALSE. While you can’t suffer a fatal overdose with cannabis, consuming large amounts can absolutely lead to severe negative consequences.
Cannabis is healthier than other drugs because it’s natural
FALSE. Just because cannabis is a plant, not a pill or another mass manufactured product, there is no reason to think it is somehow safer than other drugs.
Read the full article at thestar.com
Here are Some Public Awareness Messages from the Government of Canada
The Cannabis Act is designed to better protect the health & safety of Canadians, to keep Cannabis out of the hands of youth and to keep profits out of the hands of criminals & organized crime.
- To buy, possess or use Cannabis, you must be of legal age (18 or 19 or older, depending on your province or territory)
- The Cannabis Act includes strict penalties for selling or providing cannabis to youth under the legal age
- Legal Cannabis has an excise stamp appearing in different colours for each province and territory on product labels
- If you use Cannabis, know the health effects. Like alcohol and tobacco, cannabis has risks, especially for youth and young adults
- Don’t drive high or work impaired. Cannabis can impair your ability to operate vehicles or equipment safely. Driving while impaired by cannabis or any other drug is a serious criminal offence
- If you possess cannabis, store it away from children, youth and pets
- It’s illegal to take cannabis across the Canadian border, whether you’re leaving or coming to Canada. This applies to all countries, whether cannabis is legal there or not
- Under the Cannabis Act, access to cannabis for medial purposes will continue to be provided to those who are authorized by their healthcare practitioner
To learn more about the Cannabis Act, in effect as of October 17, 2018, and the health effects of cannabis, visit: www.canada.ca/cannabis