Ryan DeLuca is supervisor of training and compliance, member practice, with the Calgary Real Estate Board.
What are the biggest potential impacts to the residential housing market of the legalization of cannabis?
DeLuca: For some buyers, cannabis cultivation in a property may affect their ability to secure financing or homeowner’s insurance on that property. Some lenders and insurance providers have indicated that they will not deal with properties that have any history of cannabis growth whether legal or not. Buyers should make themselves aware of what their potential lenders’ and insurance providers’ positions are on that subject.
For some, the stigma of having cannabis grown in the home may conflict with their personal beliefs and they may wish to avoid viewing properties that have had cannabis grown in them.
For others it may be a misguided assumption that the seller is always required to disclose cannabis growth on the property, even if they’re not asked.
It’s important for each buyer to discuss their concerns with all the professionals they are working with to ensure they understand all the facts that may impact their desire or ability to purchase a property. Talking with a realtor before beginning the house hunting process will help identify any issues that may arise and what steps need to be taken to protect that buyer during the purchase process.
For sellers, the impact of the new legislation really relates to a potential reduction in property value if they have grown cannabis on the property. This can occur through the creation of a material latent defect (defined by the Real Estate Act Rules in section 1.1(t)) due to mould, humidity, etc., and/or stigmatization of the property altering a buyer’s perceived value of it.) Sellers need to understand that a home is worth what a buyer is willing to pay. Knowing the potential impacts growing cannabis in a home can have will help sellers make informed decisions.
If you are a buyer in the market, what should you be aware of in light of cannabis legalization?
DeLuca: A buyer should be aware that there is no automatic requirement for the legal growth of cannabis on a property to be disclosed to them. Unless a material latent defect is created (which requires disclosure), a buyer who has questions about cannabis growth on the property must ask the seller directly or have their real estate professional ask the seller or listing agent.
A seller may only respond with a truthful answer or refuse to answer the question if there is no legal obligation for them to disclose as noted above. These questions and responses should be in writing so there is evidence of what was said.
Buyers should then advise their home inspectors when they’re aware of cannabis growth so special attention can be paid to areas where damage from the plants or hydroponic gardens may be present, and ensure they are satisfied with the state of the property prior to waiving conditions on their purchase contract.
Same question if you’re a seller?
DeLuca: As a seller, it’s important to know when there’s a legal requirement to disclose cannabis growth. Seeking advice from a lawyer and giving a lawful instruction to their real estate licensee based on that advice is paramount. Failure to disclose a material latent defect created by a cannabis garden or hydroponic operation could result in costly litigation.
Under current real estate guidelines, is there any disclosure requirements of cannabis use and/or cultivation in a residence?
DeLuca: The Real Estate Act governs what a real estate licensee may or may not do and not what a seller is required to do under the law. It includes the requirement for a seller’s real estate licensee to disclose all material latent defects known to them. There is no requirement for a real estate licensee to disclose cannabis growth that has not created a material latent defect if the seller instructs them not to or if the seller fails to inform the licensee that they have grown cannabis on the property and that fact is therefore not known to the licensee.
What are the key implications of cannabis legalization if you are a condo owner?
DeLuca: Condo bylaws may restrict their ability to grow and consume cannabis in both the common areas and/or in the unit itself. Buyers should always review condominium bylaws and condo board minutes before purchasing a property to ensure that they’re in line with the buyer’s intended use of the property.
– Mario Toneguzzi
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.