The impacts of home-grown marijuana and legalization
Many Canadians are awaiting this July 2018 with much anticipation, as Bill C-45 will allow the legalization of marijuana, including their ability to grow up to 4 plants within their residence. However, without the proper protections and awareness in place this new legislation could cost home owners thousands, or even their mortgage. The increase of private residence grow-ops that will begin following legalization is a major concern for the real estate industry. Experts say that everyone from “buyers, to sellers, to real estate agents, and home inspectors” will be affected by the consequences produced by home grow-ops.
Issues with Home-Grown
There is currently no legal benchmark in the definition of a grow-op. This means, that whether it is a large-scale operation, or a single potted plant, the home is viewed in the same light. Although this doesn’t seem like a big issue to some, the underlying damages that can result from growing marijuana plants within a residence have serious ramifications on insurance, mortgages, and future sales.
Damages and building inspections
The humidity and power required to grow larger quantities of plants can lead to electrical system damages, and mold, fungus, and moisture issues within the home. These issues, and others can completely destroy the framework of the house. Building remediation is not mandated by the province with legalization, and there is no official registry of illegal grow-ops that allow future home buyers to be forewarned of the possible damages and health risks they may encounter.
These damages don’t need to be evident for a home to be labeled a “grow-op”. As there is no “definition” of size to label as a grow op, the house can be stigmatized whether it is one or one hundred plants in the house, in the case of illegal operations. These houses can be heavily damaged, and often covered up to make the home saleable.
“History has shown us that some shady property owners will go to great lengths to hide signs of a former grow operation” – Tim Hudak OREA CEO
When it comes to future sales on a home with a grow-op label, evidence shows that these homes sell for less than the surrounding houses, even if the proper repairs have been performed. Legalization including home cultivation can lead to unsuspecting buyers purchasing homes that are damaged, and could leave building inspectors on the hook if any damages are missed prior to purchase. The Ontario Real Estate Association (OREA) is urging policy makers to include protective measures for home buyers, and the future of Ontario’s housing stock.
Marijuana and Mortgages:
As it stands currently, most mortgage lenders have a very conservative approach when in comes to homes where marijuana growth has been present. Typically, traditional mortgage lenders such as banks, will deny the mortgage altogether. This denial is based on the premise of resale value being decreased in homes where cultivation of marijuana has occurred. Without this knowledge, individual’s seeking to purchase a home can run into red-tape when it comes to financing a property once used to grow marijuana, and once legalization is in place – home cultivation can lead to damages in multiple homes and minimize the available houses that will be approved by bank lenders. This results in borrowers needing to use alternative lenders. The process of approval with alternative lenders, especially where growth of marijuana is concerned requires a lot more detailed paperwork, air/mold testing, and typically a case-by-case evaluation of each home to determine approval.
If the home’s status is compromised, then the home becomes more difficult to insure. Without insurance companies who are willing to approve a home insurance policy, the mortgages will be unapproved by default. Because marijuana growth requires a large quantity of electricity, the home is at higher risk of fire. Fire insurance is a mandatory portion in ensuring approval of a mortgage.
It is unclear at this point if insurers will adjust their policies post-legalization to account for these new possibilities. This could mean those who grow within the legal limit are still risking their home coverage to do so. Many insurers are discussing the possibility of introducing policies that allow for home-growing, but it is not yet determined how that may effect a home-owners insurance premiums.
How is Home-Grown going to change Ontario?
Simply put, the ability to grow up to 4 plants legally in ones home could jeopardize their current mortgage, insurance, and future sale-ability of their home. At this time, there is currently no legislation or protection in place that will guarantee home owners their home value, insurances, or mortgage approvals should they choose to go with the crowd awaiting home-grown this summer. There is certainly a lot to consider when it comes to homes and home-grown this July.