This article has been revised to reflect legalization of recreational cannabis effective October 17, 2018.
Weed. Grass. Bud. Mary Jane. Pot. These are just a few of the slang words used for the cannabis plant — the green elixir whose properties can relax, intoxicate, soothe and relieve pain. And some of you may need that soothing, because we are entering a cataclysm of confusion and controversy about how, who and what will define the future of cannabis in our communities.
Under the Cannabis Act (Bill C-45), the legendary substance that has fired up public debate for decades, has become legally available to grow, sell, smoke, and eat – and not only for medical purposes. Many outstanding issues remain: from underage use, impaired driving, and fire and health safety, to restrictions, jurisdiction and enforcement. It’s up to each province, territory and municipality to decide on the policies and regulations they need to ensure community health and safety.
The legalization of cannabis is coming with a whole new set of issues for home buyers and sellers. Once growing cannabis plants indoors becomes legal, the number of tenants and home owners turning closets, garages, basements and bedrooms into hothouses will likely increase substantially. Even now more than 30,000 people in Canada have permits to grow cannabis at home for their personal medical use. We may end up with “pot houses” on every block.
REALTORS® and pot houses
Years before its legalization was ever seriously contemplated, cannabis was an issue that Realtors were contending with for a number of reasons. Over the years, grow op houses — even those that were remediated — carried a stigma and the Realtors who sold them sometimes did too.
There have been stories that some Realtors actively engaged in and possibly benefited from criminal activities by failing to disclose illegal grow-ups which enabled them to thrive undetected. Then there are the grow-op houses themselves, which even after remediation may pose health risks from lingering mould or faulty electrical wiring — neither of which may be easily detected.
Then there’s the odour.
“Depending on the strain, your house can smell like lemons or rotten shoes,” says Bruce Linton of Canopy Growth, a cannabis growing company from Ontario.
So far, it appears that the federal regulation will restrict home marijuana growers to four plants per household. How that will or could be enforced remains unclear.
Municipalities will be able to customize regulations for their own jurisdictions, enforcing them through fines and permit restrictions while adhering to the federal regulations. That could well mean the Fraser Valley would comprise a hodgepodge of varying policies across municipalities – arguably something we are already used to grappling with.
How the federal regulations and the local ones will affect home buyers, sellers, landlords and tenants is an interesting one.
Insurance
A spokesman for the Insurance Bureau of Canada has publicly stated that regardless of the law, many insurance companies regard home grow-ops as high-risk activities and are refusing home insurance.
“Grow-ops can cause serious structural damage because of moisture and high humidity,” says Andrew McGrath, a spokesperson for the Insurance Bureau of Canada. “Wall boards, ceiling tiles and floor coverings are often removed. Furthermore, modifications to electrical wiring can increase the potential of fire damage or loss.”
McGrath suggests that homeowners check with their insurers before making significant modifications to grow marijuana in their homes, and tenants in a rented home or apartment should inform their landlord before setting up cannabis plants.
“Insurers are beginning to look at how changes in laws might affect the coverages they offer, however, the operation of a grow-op is a high-risk activity,” says McGrath. “In the past, property insurance has not typically been designed to cover the potential damage a grow-op can cause to a house or condo.”
An added complication may develop if landlords are opposed to their tenants growing cannabis in their homes and apartments and tenants do so anyway. The issue was already heard in federal court when two BC residents challenged federal legislation that limited their right to grow their own medical cannabis. They triumphed when Federal Court Judge Michael Phelan ruled that the Marijuana for Medical Purposes Regulations did indeed infringe on Charter rights. But that was medical marijuana, not recreational.
In a Go Public report by CBC’s Rosa Marchitelli, we learned that a Kamloops landlord was denied insurance because one of his tenants was growing pot in the rental unit.
“[The tenant] got a medical marijuana licence that allowed him to legally grow as many as 60 plants without his landlord’s permission or knowledge. A call from a concerned neighbour prompted [landlord Darryl] Spencer, who is also a retired fire inspector, to check out the home he’s rented out to different tenants for a decade.
He discovered a mess of extension cords, fans and bright lights packed into a room filled with dozens of marijuana plants. The upstairs tenant, a woman with a small child, was complaining about heat radiating through the walls and electrical breakers going off.
“I was worried about the fire hazard. That was my first thought because of the extension cords, the use of electricity and that something could catch fire,” Spencer told Go Public.
Insurance providers may settle on limited home insurance to compensate for the risks associated with growing cannabis indoors, but that will likely depend on how home growing is regulated province-by-province and city-by-city.
Mortgages
Another concern is the affect the grow-op stigma has had on financial lenders to provide mortgages.
In June last year the Vancouver Sun published a story that suggests lenders are backing away from loans on former grow homes.
“Banks may shy away from lending on former grow ops because there are no consistent rules for remediation and a lingering fear that mould could appear and taint the investment. While some municipalities, like Vancouver, have rigorous rules around the renovations required for reoccupation, others do not.”
“Prospective buyers who find financing are regularly charged higher rates — some banks ask for an additional one per cent, but that varies.”
What will lenders do about providing mortgages on homes that grow their own small crop?
The Vancouver Sun article quoted Janet Boyle, Scotiabank’s vice-president of real estate secured lending, who said her bank has financed remediated properties.
“But it requires an environmental assessment, appraisal and confirmation that proper building and occupancy permits were issued. Scotiabank also caps its loan at 65 per cent — meaning buyers need to put at least 35 per cent down — and all mortgages need CMHC insurance.”
Fire and Health Risks
Of course even though the federal legislation restricts home growers recreational cannabis to four plants, the potential risks and damage to a home may not be as severe as a full blown commercial grow-op poses, particularly if regulations make home growing safer and closely monitored. But that is debatable, just as every aspect of its legalization continues to be debatable.
In response to the BC government’s invitation to give feedback on regulations for cannabis production, distribution and use, BCREA offered the following caution:
“When a property has been involved in drug production, it can pose serious health and safety risks to the public resulting from mould, chemicals thrown out in the backyard, electrical fires and invasion by criminals looking for drugs, even if the property is no longer being used for drug production.”
BCREA suggested that the province restrict cannabis cultivation to the outdoors, and introduce a registration system for properties growing cannabis, in order to better manage the risks.
In the fall of 2017, CREA held a staff information session during which Health Canada provided an overview of Bill C-45. Participants at that session agreed that real estate boards and associations should push back against the permitting personal cultivation in multi-unit and rental homes, given the risks involved.
As jurisdictions wrestle with the implications of legalization of cannabis and health and safety advocates send up warning flags, Realtors may be at an advantage in getting ahead of the cannabis curve. Having already faced the thorny issue of grow-ops for the last two decades, they may be better prepared to deal with its implications and ready to provide education, guidance and support to clients.