Page 8 - Magazine Spring 2019

4
ECONOMY AND FINANCE
BY FRANCISCO GARZÓN
After attending and viewing more than 10 seminars and videos about the new Cannabis Act there are many aspects that affect or impact the real estate market. But it is not the only industry impacted. Not only is growing a few
marijuana plants and selling cannabis now legal in Canada, it is a hot topic that needs to be understood and handled properly.
I would like to bring attention to the implications of the new Cannabis Act from the real estate point of view.
Growing cannabis in houses or condos
Growing cannabis indoors requires special conditions. These conditions are not only good for the growth of marijuana but are also optimal conditions for the growth and spread mould and fungus. The high humidity and temperature required could affect the interior of drywalls, wood, subflooring and other construction materials into the premises. To repair these things can prove expensive and create serious problems which might make a property uninsurable. “This is why cannabis grow-operations, regardless of size, have been villainized in the real estate industry” says Natalka Falconer a Real Estate Magazine columnist.
“Under the current laws in Ontario, a property seller is not required to disclose the personal history of their home, even if it carries a psychological stigma: a non-physical attribute that could trigger a negative emotional response from potential buyers” said Joe Richer, Registrar of the Real Estate Council of Ontario in a Toronto Star article on October 5, 2018. The same article says “The seller may direct their salesperson not to disclose a particular stigma. But the Real Estate Council of Ontario’s (RECO) code of conduct forbids a seller’s rep from being untruthful if they’re asked a direct question about a property. They are, however, within their rights to decline to answer and
suggest you look into it yourself.”
Is it a sure fact that growing four plants of marijuana will prove disastrous? It is not, but the problem is controlling that people not growing more that four plants and putting measures in place to control mould infestations in homes that could create serious health issues. The fact is that your own due diligence is required if you or your client is concerned about buying a house that you may suspect was a grow-op. Home inspections will be critical and highly recommended, but also ensure the inspector is well trained and equipped to investigate properly regarding grow-ops. It is also highly suggested that you do your own research, for example by talking with neighbours.
Smoking cannabis and Neighbors
This is perhaps the most critical issue, and the source of many complaints to Property Managers and the Police given the odour and the social stigma associated with cannabis. Today it is not uncommon to walk in a park or down the street, and smell marijuana. Now that it is legal, everybody must simply deal with it whether they want to or not. The issue then is how to smoke cannabis without bothering your neighbors or others? There are devices designed to help minimize the odour such as vaping pens (vapes) or bongs, yet it is still recommended to use air fresheners to eliminate the odours. The tricky part is getting your neighbors to actually use these.
Insurance Industry
Having seen some grow-houses during my real estate career, I can say with confidence that these houses are often modified with electric boards and wiring changed to allow appropriate lighting and temperature. Normally these houses are abandoned and unkept until police or neighbors detect them as grow-houses. At which point the entire property including walls, ceiling and flooring
are seriously affected by mould. Almost always these houses are not salvageable and must be re-built entirely. Considering this it is easy to understand the stance of the Insurance Industry which is typically to reject any request to insure these properties.
Some insurance companies are threatening to cancel coverage altogether if they realize that cannabis plants are grown on the property. Even though it is completely different to have a grow-house (which are illegal and create a large amount of damage) versus cultivating four plants that can be grown safely. While insurers may be overreacting, they need to remember that Federal legislation allows individuals to grow up to four plans in their home.
Condominiums by-laws
Many condo owners are concerned about the new Cannabis Act. They are looking for answers as to how Property Managers and Condominium Boards will handle and control the fact that owners and tenants are legally able to smoke and grow cannabis plants. Condo owners are also looking for regulations and designated spaces for marijuana smokers similar to those for cigarette smokers, only Cannabis requires consideration of the odour and moisture issues inside units which makes it harder to control.
Tenants
Even though it is legal to smoke and/or grow cannabis, as a property-owner it is fully recommended to include a clause in lease agreements to stop tenants from smoking or growing marijuana on the property. If this clause existed and a tenant smokes or grows cannabis, then a case to evict them could be addressed to a court. However, in order for this to occur, you must document and prove that the tenant is not fulfilling the terms mutually agreed in the lease while affecting other tenants or damaging your unit.
8 THE BEST MAGAZINE SPRING 2019
WWW.THEBESTGROUP.CA
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