For users of recreational cannabis in Canada, “4/20” may no longer be the most celebrated date. October 17th, 2018 has been declared the official date that use of marijuana for non-medicinal purposes becomes officially legal, essentially the last hurdle to the complete legalization of pot throughout Canada. While “10/17” doesn’t quite have the same ring to it, marijuana users will be breathing a sigh of relief nonetheless. But do property owners feel the same joy, especially when it comes to the issue of pot cultivation on their properties, whether in the past or in the future?
The Risks of Selling or Buying a Former Grow-op Property
The Risks for Sellers
Canada initiated the process of decriminalizing marijuana in 2016 in part to abolish the illegal marijuana grow-op industry. Unwitting owners whose properties were being used as large-scale indoor marijuana farms were devastated financially, and the ramifications of the once-criminal activity still resonate for any property deemed to have been a grow-op in the past.
DIY electrical hacks to power additional lighting and irrigation increase risk of fire. Added humidity required to grow thriving plants leads to mould, spore, and fungus growth and possible structural damage. Chemicals, pesticides, and fertilizers used for cultivation contaminate the plumbing, walls, and flooring.
Not only does the value of former grow-op properties drop significantly, but owners must decide whether to spend upwards of tens of thousands of dollars to remediate before selling or lose even more revenue to sell in as-is condition. Realtors request owners to complete disclosure statements indicating the property’s history as a grow-op in order to be listed on the MLS system (note: there are no such requirements by federal or provincial law); should the seller disclose the history, the field of buyers willing to assume additional risks narrows.
The Risks for Buyers
In this competitive real estate market, prospective buyers may be tempted by bargain basement prices for former grow-ops. They may see an opportunity to remediate a property to either flip or occupy, but they often face unexpected costs like environmental assessments, additional inspections and appraisals, and occupancy permits. Because there are no existing federal or provincial standards to certify whether a property has been satisfactorily remediated, former grow-op properties are considered extremely risky for mortgage and insurance providers, who can penalize owners by denying service outright or inflating rates. Scotiabank, for example, requires prospective buyers of former grow-ops to submit a minimum down payment of 35% to qualify for financing.
New inhabitants can also face potential safety and security risks due to the former criminal element linked to the address. Former associates or clientele of past grow-op proprietors could arrive on the doorstep anytime looking to do business or worse.
When attempting to resell the property in the future, owners may be surprised to find that despite their efforts to meticulously remediate and renovate, their properties continue to carry the stigma of being a former grow-op. Many homeowners find it impossible to recoup their investments.
The Risks, Regardless of Size
There continues to be lengthy debate to determine how big an operation qualifies as a grow-op. Does a home in which the previous occupant cultivated 4 plants for personal medicinal use constitute the same risk as a home that housed 100 plants grown for illegal profit? Caring for marijuana plants as you would any other houseplant with a little water and natural light minimizes the risks. But as soon as you bring in specialized equipment - lights, hydroponic irrigation, chemical fertilizers, etc. – the risks begin to equate that of a commercial operation.
In an opinion piece in the Financial Times published March 21st, 2018, Canadian Real Estate Association CEO Michael Bourque argues that even small-scale cultivation can have similar detrimental impacts on the property itself. Finding mould growth in any property is cause for concern for buyers; for those with respiratory issues, small children, or the elderly, it can even be a deal-breaker. Mr. Bourque furthers his argument:
“In addition to health risks, improper installation and the use of grow-op equipment, including high-wattage lights and irrigation tools, pose safety risks. With just three crops a year of certain strains, moderate yields could reach over five kilograms a year. At that level of production there is the potential for criminal activity, including easier access by minors, and apartment dwellers could be subject to health effects from smoke, odours and the consequences of a grow-op.”
A Property Owner’s Guide to Growing Legalized Cannabis
Whether you are in favour of growing marijuana on your property or not, the fact is that in most provinces across Canada you will be permitted to do so as of October 17th, 2018. Only Manitoba, Quebec and Nunavut have chosen to prohibit home cultivation. Newfoundland and Labrador are currently undecided.
If you plan to grow marijuana on your property, or you plan to permit your tenants to do so, here are the current guidelines specific to British Columbia.
RULES & REGULATIONS FOR GROWING NON-MEDICINAL MARIJUANA
- Adults over 19 are permitted to grow a maximum of FOUR PLANTS no more than 100cm in height for personal use PER HOUSEHOLD. To be clear: this means that no matter how many adults occupy a household, a total of FOUR plants can be grown in said dwelling. Growing recreational cannabis is NOT PERMITTED in dwellings that also offer daycare services.
- Plants MUST NOT BE VISIBLE from public spaces.
- Violations of these regulations could result in FINES ranging from $2000 to $100,000, and could also result in IMPRISONMENT from 3-12 months.
- Landlords and strata councils/condo boards WILL BE ABLE TO RESTRICT growing of recreational marijuana in their units if they choose.
Here are some additional facts about purchasing, consuming, and distributing recreational marijuana in BC:
- Minimum age for purchase, consumption, or distribution is 19 years.
- Non-medicinal cannabis will only be available through BC Liquor Distribution specialty retailers.
- Adults are permitted to possess no more than 30g of recreational marijuana in public spaces.
- Smoking of non-medicinal marijuana is prohibited in any space where smoking or vaping are also prohibited, including playgrounds, sports fields, skate parks, and other places where children commonly gather.
Legalizing recreational cannabis is a victory for proponents, but the process to regulate the activities associated with growing, distributing, purchasing, and consuming it will be an on-going bureaucratic traffic jam across the country in the coming months. Remain vigilant about keeping up to date with the latest news on both a federal and provincial level. We will endeavour to update you as this complex process evolves.
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The Neal Estate Team is your #1 source for all of your Victoria BC real estate needs. Get in touch with us online or by phone at (250) 386-8181 to speak with a Victoria real estate buying or selling expert today. With decades of experience as a top selling Victoria REALTOR® and ranked in top 1% globally with over 4,000 transactions and $1 Billion SOLD, Ron Neal & The Neal Estate Team have the industry experience and market knowledge to help you make smart and informed buying or selling decisions.