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The Cannabis Act and Real Estate

Blog by Nigel Denham, Senior Vice President - Sales | July 31st, 2018

The new Cannabis Act is scheduled to become law in October 2018. The new federal law will allow Canadians to smoke, eat or vape marijuana in their homes and grow up to four (4) plants per household. This column will provide some information on the new legislation as it will undoubtedly impact homeowners, realtors, lenders, home inspectors and insurance companies. Currently, there are no regulations as to what constitutes safe growing of cannabis.

The new legislation will likely create uncertainty in the real estate industry as it will affect many parties. For realtors and sellers, a major issue will be disclosure requirements. For instance, must a realtor and seller disclose that a property is or was a marijuana grow op when listing the property for sale? When it becomes a legal activity can it be assumed that there is no legal obligation to disclose? What if the growth of marijuana has resulted in damage to the property such as mould?  The answer to these questions is not straightforward as it will depend on whether or not the damage is considered a latent or hidden defect which could render the property unfit or unsafe for habitation.

For lenders and home insurance companies, the new legislation may require them to change or modify their policies. Currently, lenders and home insurance companies take a conservative approach to properties that have been used for the growth or manufacture of marijuana. Many lenders will not give mortgage approvals and many insurance companies will refuse to insure grow op properties. This could have a major impact on a buyer’s ability to close a purchase transaction. We will have to wait and see how lenders and  insurance companies adapt to the new legislation.

The new legislation will also impact landlords, tenants and condominium corporations. While the new law will allow the growth of marijuana, it raises some important questions.  For instance, will a landlord be able to evict a tenant who grows or uses marijuana in the leased premises? The answer is unclear, however, landlords concerned about this should include a clause in their leases prohibiting the tenant from smoking or growing marijuana on the premises. This may make it easier to evict a tenant.

Condominium boards and corporations will also have to review the rules, declarations and bylaws in light of the new law. Some condominiums have already passed rules restricting the  use or growth of marijuana. Any new rule must be reasonable to promote the safety of the unit owners and prevent unreasonable interference with the use and enjoyment of the unit. Condominium corporations may also have to make reasonable accommodations for those who use marijuana  for medical reasons. Buyers of condominiums should have their lawyer closely read the condominium documents to determine what is and what is not permissible with respect to the growth and use of marijuana.

As the new law comes into force many questions will arise will need to be answered. Stay tuned.

Article Provided By Isenberg and Shuman