Cannabis and Property

Oct 17, 2018 Cannabis is Legal

64% of Canadians say smoking pot indoors will harm a house’s resale value: Survey

Legalization of recreational cannabis is now here. A national survey by Zoocasa reveals that 52% of home buyers would reconsider buying a property if cannabis had been grown there. Penelope Graham, managing director of Zoocasa, discusses the findings. Personal Investor: How pot fits into your portfolio?

Most Canadians won’t grow cannabis at home, and many think smoking indoors will hurt resale value, survey indicates.

Many Canadians are anxious about the intersection of cannabis and real estate, and while there may be a new way to take the edge off, many won’t be growing their own pot at home, according to a new survey.

When it comes to growing cannabis inside the home — up to 4 plants per residence will now be the legal standard in Ontario — the Zoocasa survey indicates that only 15% would consider it. And 52% said they’d be less likely to consider purchasing a home if “even a legal amount of cannabis” had been grown there. Sixty-four per cent of all respondents said they believed that smoking cannabis indoors would harm a home’s resale value.

Online real estate company Zoocasa conducted its survey online, and close to 1,400 people responded. The majority were Gen Xers and baby boomers, while 8% were millennials. The younger generation was “slightly more relaxed” about cannabis: less likely to think that legal cannabis cultivation would stigmatize a home, and less likely than their elders to believe a dispensary would reduce the value of nearby homes.

Mayor John Tory recently wrote to Ontario’s attorney general, emphasizing the need for co-operation when it comes to cannabis retailing. At first, the online Ontario Cannabis Store will be the only legal way to buy recreational cannabis, but the Ontario government has planned for a “tightly regulated private retail model” starting in April 2019.

“I do not believe that the residents of Toronto will support the widespread proliferation of storefront outlets for the sale of cannabis, especially in residential neighbourhoods and in certain established retail areas,” Tory wrote to Caroline Mulroney.

Zoocasa says it conducted the study because legalization represents “uncharted territory.”

“We don’t really know if you choose to participate in what is now a legal activity, are there going to be consequences or implications for your home insurance, or your ability to sell your home, or the ability to get a mortgage on a home where these acts have occurred?” asks Penelope Graham, Zoocasa’s managing editor.

A large majority — 88% — of respondents who identified as landlords said they planned to ban cultivation or smoking within their rental units, while 35% of tenants said they should be allowed to smoke cannabis inside their home. A majority of Canadians surveyed favoured rules: 61% didn’t think residents should be able to smoke cannabis within their units, and 64% believe that condo boards and property managers should be able to ban smoking inside.

In the lead-up to legalization, many condo boards have amended or created new bylaws, empowered by the Condominium Act.

“Those powers are enforceable in a court of law, and as long as they’re ‘reasonable’ they’ll be upheld by the courts,” says Joe Hoffer, a lawyer based in London, Ont., who specializes in condo legislation and residential tenancies legislation.

Hoffer works primarily on behalf of landlords and building operators. He recommends drafting rules that regulate smoking of any substance.

“Then you qualify the rule by saying unless it’s necessary to accommodate a person under the provisions of the human rights code,” he says.

What did they ask

Would you grow cannabis at home?

Yes. It’s legal, I see no issue with it.
Yes, but only if it won’t bring down my property value.
No, but I don’t mind if my neighbours do.
No, and I hope my neighbours don’t, either.
Maybe. I’d have to see how things unfold after legalization.
I don’t use cannabis and won’t grow it.

He says the majority of condos have enacted blanket bans on smoking in units and common areas, as well as cultivation.

“A couple of plants, I don’t think anybody is going to care — but if you don’t have the prohibition, then you have no leverage when a person with a couple of plants decides to step up the operation because what they’re growing isn’t very good quality. That’s when you get up to the pesticides and some of the things used to enhance growth. And once you’ve invested in the equipment, why stop at 4?”

In Hoffer’s experience, “there has been virtually no blowback from residents.” In condos, owners can fight a proposed ban if a majority votes against it. Hoffer knows of one building in London, Ont., where that happened, and cultivation and smoking will be allowed.

The survey indicated some confusion about tenant rights: roughly 2/3 of tenants didn’t know their rights or were unsure, while 2/3 of landlords said they understood what can and can’t be enforced.

While condo boards can create bylaws or rules, most landlords and property managers of apartment buildings use the “standard lease” template created by the Ontario government. “It says are there smoking rules? All you have to do is click the box yes — and then show what the smoking rules are and you’re off and running,” Hoffer says.

With current tenants, he says that “most industry leases” have a ‘rules and regulation’ section at the very end, and there is a rule that says — “We can add additional rules on notice to the tenants.”

“That is what landlords in the private sector have been relying on to introduce those rules,” he says.

Will Hyde, an expert with online cannabis resource Leafly Canada, says that “when you sign a lease you’re sort of at the mercy of your landlord.”

“While I don’t necessarily support all those decisions, I understand them — as a business owner and a landlord you want to protect your investment,” he says. “If that’s the position you’re finding yourself in, it might be a good idea to find a more cannabis-friendly living situation. That said, if they’re going to start policing what people are consuming in their own homes they’re opening a big can of worms.”

Hoffer imagines there will be legal challenges. “I think the gloves come off on both sides” on Oct. 17, he says. “It’s certainly good for the lawyers.”

David Reid, president of the Ontario Real Estate Association, says his organization hopes Ontario will follow the example of Manitoba and Quebec, and ban at-home cultivation (excepting people with medical licences).

At the least, he’d like to see one change: in homes under 1,000 square feet, he thinks it makes sense to have one plant rather than four.

Reid says the high temperature and humidity associated with growing cannabis can lead to mould, fungus and other issues that worry potential home buyers.

Cannabis expert Hyde says that while there is some validity to those concerns, “honestly I would think you would probably have a higher chance of suffering from mould and mildew in a poorly ventilated bathroom.”

He says high temperatures and humidity are associated with early stages of growth, and any grower “paying attention” shouldn’t see those problems persist. He thinks many of those issues are “attributed to some of the black-market tactics we saw with grow houses.”

He noted there are “home grow appliances” that look like mini-fridges, fully automated and sustainable. “It keeps your grow completely isolated while also sort of fitting in with the look of with a more modern condo and the regular appliances you tend to see.”