Well today is the day!
Cannabis news has dominated the headlines for some time now but something that not everyone has considered yet is how this legislation could affect their home sale or purchase.
Our real estate regulator in Alberta has stated that no new rules will be enacted in regards to real estate disclosure – rather the existing rules will be applied to cannabis as well.
When selling a house, an owner will NOT have to disclose the growth or consumption of legal cannabis. They only have to disclose if there is any “material latent defect” in the house – in layman’s terms, this is a substantial defect that is not discoverable by a normal home inspection.
Most home inspectors are quite familiar with the signs of an illegal-style grow operation in a home and the risks that come along that – think plants being grown in a hydroponic set-up filling up an entire basement, stealing electricity from neighbours, potential moisture/mould issues, etc.
However, if Canadians are choosing to grow a couple of small plants in pots on their kitchen counter, we have been told this will be relatively equivalent to having a couple of tomato plants and would not have any negative effects on the house.
Buyers also need to be aware of several potential issues that are yet to play out in the coming months. Check out our tips for both Buyers and Sellers below!
As a Seller:
- You can choose to disclose or not disclose the growth of cannabis in your home to potential Buyers up front. However, if a potential Buyer asks a direct question, it must be answered honestly. This means if you are asked “Has any cannabis been grown in or on the property?”, you can answer No if that answer is no, Yes if the answer is yes or “We will not disclose” if the answer is Yes and you don’t want to say that.
- If you have altered electrical in unsafe ways or are aware of the presence of mould, these are the types of “material latent defects” that you are required to disclose up front.
- If you haven’t grown or smoked cannabis in your property, this could be a selling feature. The same way that some houses are currently marketed as “smoke free” or “pet free”, your house could be “cannabis free” and appeal to some buyers in that way.
- Whether you have grown or not grown, you may want to perform a pre-listing home inspection to show potential Buyers that there aren’t any substantial issues with your house.
As a Buyer:
- Sellers are not required to disclose so make sure to tell your realtor before you start looking at houses if cannabis growth in a home is a deal-breaker for you. This allows them to ask direct questions of Sellers prior to viewing a home.
- Sellers can only disclose what they know, so as the years go by and properties have changed hands multiple times since legalization, current owners may not be aware of the habits of previous owners. The same way that you can ask a Seller whether there has been a death on the property, if the house was built in the 1920’s and has had 15 different owners since then, it’s very unlikely a Seller could tell you whether there ever has been – only whether it has happened since they owned it.
- You may want to ask for copies of the recent electrical bills for a property if you have concerns about cannabis growth – this could indicate whether a larger-scale grow op has existed.
- Insurance and mortgage companies have not yet come out with blanket rules about homes with legal cannabis growth. Many of these companies will not insure or finance homes with illegal grow-ops in their history but the small-scale legal growth that we will see going forward has not been encountered yet. Keep in mind that if you offer on a property with cannabis growth and your insurance or mortgage company somehow finds out prior to you taking possession, they may choose not to insure or finance the property. You may want to check with your own insurance company during the financing condition period to make sure you will be covered and can take possession of the property without any hiccups!
- If you are planning to grow cannabis after you purchase a property, keep in mind that it could pose some difficulties when you choose to resell it down the road.
- Also, if you are hoping to grow cannabis in your home but are looking at condominiums (including townhomes or apartments), there may be condo bylaws that restrict growth and/or smoking of cannabis in your property. Many condominiums are revising their bylaws this year or enacting a cannabis policy.
Realtors are here to help you navigate the ins and outs of real estate sales and legal cannabis is just one of the many issues that we can advise on.
Any questions or comments, please drop us a line!