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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

October 17, 2018 | Weed deeds

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

As you know (how could you not?) this week our Dominion joins mighty Uruguay, a Third World, barely industrialized country (pop 3 million, average annual family income $10,000 US), in legalizing weed.

Since only Stoners and knuckle-dragging MAGA believers read this blog, we will refrain from passing any judgment whatsoever on the idiotic, populist idea of a federal government encouraging widespread smoking and drug use when we have a health crisis. So let’s be tolerant. Ancient Rome used to be a cool place, too.

In practical terms, legal cannabis is a big deal for real estate.

Two weeks ago this blog outlined the ways some Big City condo corps are dealing with the fact Canadians have the right to turn into urban farmers and cultivate plants in their own units. Now that garden centres are reporting a run on hydroponic gear and online stores are shipping tons of grow tents, condo boards and landlords are scared. Smell, mold, fire hazard all come to mind when people contemplate weed enthusiasts turning their bathrooms and laundry closets into grow-ops.

Condo building managers as a result are busy passing bylaws prohibiting high-rise ranchers from planting their crops. They also want to deal with all that stinky smoke expected to waft under sills and through windows. Legal weed is prompting many of them to institute smoking bans in individual units. Others are adopting a ‘grandfather’ approach, making units smoke-free when existing owners sell. Hardest hit, of course, will be legions of amateur landlords, whose tenants will argue they have the legal right to toke at will and turn their shower into a ganja rain forest.

But wait, this isn’t just about condos.

Would you want to buy a house in which MJ crops had been cultivated? Up to this point the answer has been a resounding ‘no way.’ It was illegal activity, after all. Now it’s not. But a survey this week found 52% want nothing to do with any piece of real estate where weed’s been raised, legit or otherwise. So realtors – obliged to reveal all they know about a property’s history and usage – could be in an ethical pickle going forward.

The prospect of purchasing a home that’s been used to grow marijuana may continue to provoke an emotional response from some buyers,” says Ontario’s real estate association in a stiff note to its members yesterday. “As such, it’s important to understand whether this is a concern for your client and to take appropriate steps to protect their interests.”

Stigma. That’s the issue. Courts have found in favour of buyers who walked away from deals because the properties they went after had a stigma – causing a negative emotional response when previously-undisclosed info was made available to them. You know, like discovering a dude suicided in the bathtub, a crazed clown buried bodies in the garage or, in this case, someone had two marijuana plants on the porch.

“Growing marijuana inside a dwelling may not necessarily cause physical damage to a property,” realtors are being told. “If there is no physical damage or if the damage has been fully remediated, and therefore free of any defect, the home’s history is still a potential cause for stigma if it is a concern for the buyer. Before listing a property, it’s important to discuss with the seller any issues with the property that may be relevant to the sale.”

Ontario’s Courts have determined that sellers don’t have to proactively disclose the history of their home during their ownership of it, even if the property carries a stigma. However, there’s nothing to stop a buyer from trying to sue the seller for failing to disclose the stigma. Even if the lawsuit is unlikely to succeed, the seller could still face a long, costly legal proceeding.

A buyer’s sales representative may also specifically ask whether the home has ever been used to grow marijuana. In this case, there are two options: you may either answer truthfully, or decline to answer the question and direct the buyer to conduct their own research. The choice of these options lies exclusively with the seller.

Even if you, as a sales representative, are not comfortable with the seller’s disclosure strategy you must respect and follow their direction. In this event, your options are to comply with the seller’s wishes, or, to decline to continue working with the seller and step away from the trade. Under no circumstances can you disclose a stigma without the seller’s consent.

So, if you’re mulling raising little weed babies in your house, think again. There could be a lawsuit in your future if you come to sell and don’t disclose this fact. But if you do, half of buyers might walk once they hear.

Meanwhile, what if you’re buying and don’t want a former grow-oppy place?

“You may try to include in your offer a seller’s warranty that the home was not used to grow marijuana,” is the professional advice. “Depending on the language of the contract provision, if the seller refuses to agree with the warranty, it may indicate that the property was used as a marijuana grow-op, or, it may simply mean that the seller doesn’t know what went on in the property before they bought it.”

Well, there you go. A non-judgmental, fair set of comments on how you’re now part of a grand social experiment the outcome of which is hopelessly unknown. Good luck.

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October 17th, 2018

Posted In: The Greater Fool

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