Page 24 - Magazine Spring 2019

4
ECONOMY AND FINANCE
Legalized Marijuana By Nestor Paez
and the Canadian Mortgage Industry
October 17th, 2018 was an important day in Canada’s social history. It’s the day when Recreational cannabis was legalized by the federal government across the country. We are the second major country in the world to do this. How does this affect the mortgage business when someone comes to obtain financing for a home purchase and the sellers have disclosed that they smoked pot in the house or grew a few plants , how will this affect their home purchase?
A few years ago, someone disclosed that their home had been a grow-op six years previously and their home insurance company cancelled their policy citing safety issues. It was suggested that sellers who have grown a few plants might want to get a head of a problem and have a home inspection before they list the property. If there are any issues of mould or electrical systems that are not up to code, they can remedy this and have a quick sale.
Although growing up to four plants in your residence will no longer be considered “illegal activity” by the Cannabis Act, the concern for lenders and insurers is with respect to pot-related damage to properties
and the uncertainty surrounding remediation standards and costs. Home inspectors have to be vigilant and trained to spot such property damage and deficiencies caused by the use and cultivation of cannabis. Some examples of the risks of growing the plant in your home include the development of mould caused by the humidity required to grow it, an overtaxed electrical system due to the use of grow lamps, increased fire hazards as a result of people drying marijuana in stoves, and unwanted odours from the plants that encroach upon neighboring properties. These health, safety and nuisance concerns are part of the lingering stigma attached to such properties where cannabis has been grown and consumed. Such a stigma can potentially affect the property’s value and marketability.
Currently, most lenders and home insurance companies take a conservative approach to properties where marijuana growth has been present. Large institutional lenders typically do not give mortgage approval when there are signs of a grow-op on the property, irrespective of the legalities. Consequently, purchasers
BY NESTOR PAEZ
of such homes would need to
seek a mortgage from alternative lenders, which may mean extensive paperwork, air and mould testing and reliance on case-by-case exceptions to obtain mortgage approval (not to mention being hit with significantly higher interest rates and lender fees).
If you are thinking about growing a few plants in your home should consult with your mortgage lender and home insurer on this issue prior to partaking in such activity. It is much wiser to ask for permission than to ask for forgiveness in this circumstance. Be smart!!
Source: Dominion lending Centres Blog & lcolaw.ca
24
THE BEST MAGAZINE SPRING 2019
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