Since October 17th, marijuana has been legal in Canada. We are the 2nd* country on the planet to legalize pot and the only G7 country to do so.
Canadians can buy it, smoke it, eat it, grow it or weave baskets with it, as long as our source of choice is a government regulated distributor, and the purchaser is of the age of majority.**
Or we can grow our own, up to 4 plants per household, maxing out at 30 grams of product.
While pot has been used medicinally, recreationally and for textiles derived from hemp fiber for thousands of years, when it comes to real estate, Canadian homeowners and potential buyers are navigating uncharted waters.
If you are a seller, what do the cannabis rules mean for you? As a buyer, what should you be aware of?
Realtors, mortgage professionals, insurers, inspectors and real estate lawyers are debating these questions on a daily basis. Theories and conjectures abound. Many knowledgeable, experienced people have varied, even strongly conflicting, opinions.
But, the one thing we all agree on, is that the reality of cannabis legalization has yet to be sufficiently tested in the open market.
I, for one, don’t have a green thumb. Even so, I suspect that many savvy horticulturists will harvest more than 30 grams from 4 plants.
Healthy harvests or not, here are a couple of points to ponder:
As a buyer, is it in your best interest to request that a seller disclose if cannabis has been grown in the home?
As a seller, is it necessary to answer such a question if you are growing & enjoying within the letter of the law and the plants are out in the open, for anybody to see should they choose to look?
The ins & outs, ups & downs of the issue are varied.
If you are a seller, showing your home, how do you feel about the possibility that buyers may have access to your bountiful harvest? Some buyers aren’t shy about sampling apples from the backyard tree, or saskatoons off the bushes in the alleyway. Will these same buyers be eager to snip a ripe bud off your mature plant? (Of course, buyer behavior comes down to capable realtors educating their clients but, in the end, there all kinds of skill sets managing all types of people. In other words…things happen.)
From a seller’s perspective, you can be certain that the aesthetics of 4 healthy plants will appeal to some potential buyers but turn off others. No plants, on the other hand, will mean the question of appeal (or not) does not come into play.
A frequent question from buyers is, “Will CMHC, Genworth or Canada Guaranty insure a property when the seller has voluntarily acknowledged ownership of 4 marijuana plants?” For now, CMHC claims “Business as usual.” Genworth and Canada Guaranty are evaluating on a case by case basis.
Sellers are expressing concerns that interested buyers will be turned down for high ratio mortgages if the three big insurers start to get nervous about cannabis in the home. And, truth be told, since we are in uncharted territory, both sellers and buyers can expect that the playing field will change, then change again, as insurers test the market and hone policies accordingly.
Currently, very few lenders will advance a mortgage on a known, or stigmatized grow op. If your 4 plants appear to be bigger, better, badder than your neighbor’s 4, can you prove that you truly only have 4? Should you even have to back this up? Will buyers shy away if they think that their lender could dig in their heels?
Home inspectors evaluate properties with healthy foliage all the time. I have never seen an inspection fail because a seller has had four robust tomato plants thriving in the living room. But, I have seen plenty of reports that red flag high moisture levels in the drywall or that put the kibosh on a deal when mold is evident. Generally, if you are growing plants in soil, moisture levels won’t skyrocket. Hydroponic production could produce different results.
Concerned buyers who are wondering if they are looking at an actual grow-op rather than legal cannabis horticulture should be vigilant about unusual looking electrical work, evidence of mold, etc. If anything looks amiss, further investigation is warranted.
A thorough home inspection conducted by a qualified and knowledgeable individual is always of value.
Another possible point of contention is whether or not pot smoke from one unit will impact the salability or rental potential of an adjacent unit in a multi-unit complex. For now, the majority of property managers and landlords maintain a ‘no smoke’ policy. Yet, at the same time, we are legally permitted to smoke weed within the confines of our personal residences. While nothing prevents condo boards or management companies from enacting their own rules for specific properties, logic suggests that it is only a matter of time before this is tested in the court system.
On your own property, the city currently treats cannabis smoke as if it were fire pit or cigarette smoke. But, refine oil using an organic solvent and you have violated a federal law. Explosions can happen when organic solvents come out to play. If a big bang occurs, you may not have a home to sell.
Since we are only a few weeks into legalization, most of the risks outlined here are hypothetical. Yet, it won’t be long before chat around the workplace water cooler features buyer’s, seller’s, investor’s and landlord’s individual experiences with how marijuana legalization has impacted individual transactions.
As always, the more you know going into any venture, the more likely potential perils will be avoided. Surrounding yourself with a knowledgeable and experienced team of industry experts is always the best play of the game.
*after Uruguay in 2013
**18 years old, in Alberta, for consumption. Anybody can weave hemp, if they want to.