For better or worse, Canada has legalized marijuana. The newfound recognition to legally purchase, grow and consume recreational cannabis is a positive to many. However, not everyone is celebrating. If you are buying or selling a home or condominium unit, it’s important to understand how the new cannabis laws, especially as they relate to the growth and cultivation for personal use, have changed the legal landscape for real estate in Ontario.
Generally, when an Agreement for Purchase and Sale (‘APS’) has firmed up between a buyer and seller, there will be several conditions and warranties that the buyer and seller will provide to one another in forming the basis of their transaction. Common examples would be:
- buyer’s creditworthiness/ability to fund the purchase;
- buyer’s satisfaction as to the legal clarity of a condominium’s status certificate; and
- seller’s assertion that no growth, manufacturing or distribution of cannabis has taken place on the property.
Apart from the seller’s warranty on the APS, a buyer’s lawyer would sometimes go a step further and ask for an explicit warranty by the seller in another document at the time of closing. At the time when pot was illegal, this rationale seemed obvious. For one, clandestine grow-ops were shoddily built and caused damage to the structure of the home, oftentimes leading to mould, foundational degradation, building code violations and damage to the internal structures. Additionally, properties that were involved with marijuana production usually caused environmental issues and health and safety concerns. Even if these were minimal concerns (perhaps the home was going to undergo substantial renovations), the sheer fact that a property was linked to illegal activity would be a moral (and sometimes financial) black eye for some. It makes sense then that warranties were put in place during real estate purchases to ensure that buyers had legal recourse should the seller have misstated the property being listed for sale.
All this to say that if a buyer was maverick enough, or if the seller was in a position to push its way forward with no conditions or promises, the transaction could still technically take place. The warranty was simply a means to ensure buyer satisfaction and legal due diligence during a climate where cannabis was illegal.
According to Canada’s Cannabis Act, individuals are now allowed to grow up to four marijuana plants in their residence. The Act, coupled with provincial and municipal laws, carry stringent rules with regards to personal pot cultivation. So, how does this affect homebuyers?
From a legal standpoint, buyers can still insist on the seller providing warranties. If these assurances are given by the seller, buyers still have the same legal remedies from the pre-legalization era. Condominium unit owners must still comply with any non-smoking and plant cultivation restrictions put in place by their condo boards via their declarations, by-laws and internal rules. This offers a further layer of protection or would-be buyers of condo units.
However, as the recreational use of cannabis grows in popularity, the continuation of warranties and condominium restrictions remains to be seen. In the former situation, if changing public opinion leads more homeowners to grow their own cannabis, buyers wishing to impose a pot-free warranty could be limited in their choice of homes. Conversely, homeowners that have decided to grow cannabis may also see a limited buyers list should they decide to sell in the future. In either case, the possible attitude for future buyers and sellers could be a ‘take it or leave it approach’. In the latter case of condo units, it remains to be seen whether the smoke-free mentality will change to provide a carve-out for cannabis users.
Even if buyers and sellers make peace with the growth of marijuana in a home, another cause for concern is what, if any, measurable damage can come from growing up to four plants in a residence. While the technology for hobby growers doesn’t possess the same scale of energy, resources and space required from a large-scale grow-op, there is still limited knowledge and research available for people to assess whether small batch cannabis cultivation creates any damage to the home. In conjunction with this concern is the question of whether or not mortgage financers will be as concerned with marijuana cultivation as before. In any case, the prospect of home appraisers, inspections and costs associated with navigating this new landscape may pass on to the buyer and homeowners.
Disclaimer: Information made available on this website in any form is for information purposes only. It is not, nor is it intended to replace, legal advice. Contact Chu & Huang Law to discuss a specific legal issue and please note that contacting Chu & Huang Law, on its own, does not create a lawyer-client relationship.