Impacts of Cannabis Legalization on Real Estate Services
On October 17, 2018 the production and use of cannabis was legalized across Canada. The introduction of the Cannabis Act is meant to protect the public and keep profits from sales of cannabis out of the pockets of criminals and organized crime. The new legislation is also expected to have an impact on real estate transactions and services.
To help BC real estate licensees understand how legalization of cannabis may affect real estate services – including residential sales, commercial transactions, and rental property management – RECBC hosted two free Professional Matters webinars for managing brokers in January 2019. The webinars, featuring real estate lawyers Herman Li and Neil Davie from Vancouver law firm Norton Rose Fulbright and RECBC’s Professional Standards Advisor Marty Douglas, are available on RECBC’s website, along with an FAQ with responses to questions posed after the webinars.
Don’t have time to listen to the full webinar? Here are key takeaways that will help you to be more informed about the impacts of cannabis legalization on real estate services:
Legal Growing Limits and Tenancy Agreements
Under the new legislation, adults can legally grow up to four cannabis plants in one dwelling. This raises some unique concerns for tenants: if the tenancy agreement was entered into before October 17, 2018 the agreement will prohibit growing cannabis plants.
Cannabis, Material Latent Defects and Disclosure Requirements for Buyers Agents
Moisture that is produced from growing cannabis plants in a residential property can cause lasting damage such as mold and spores in the walls, ceilings and floors, and can impact air quality. Licensees must make reasonable inquires into the condition of a property that their clients are interested in. Any information arising from such inquires, positive or negative must be disclosed if it relates to a material defect.
Failure to make reasonable efforts to discover relevant facts, and failure to disclose information, can be grounds for negligent or fraudulent misrepresentation claims or professional misconduct.
Acting for Sellers
A seller’s licensee who knows of a material latent defect and conceals or makes other misrepresentations may become liable to the buyer for damages suffered as a result. Licensees must disclose defects in a property from cannabis cultivation that meet the definition of a material latent defect (a defect that “renders the real estate dangerous, unfit for habitation, unfit for the purpose for which a party is acquiring it, would involve great expense to repair, or is required to be remedied under the order of a local government or authority”).
- Best practice tip: have a frank conversation with your client to find out if there has been any cultivation of cannabis on the property. The safest approach may be to disclose it in order to avoid future problems with the transaction.
Cannabis and Strata Management Services
Strata corporations can take steps to restrict the consumption and growing of cannabis by either creating a new bylaw or rule, or by amending existing tobacco bylaws/rules to include cannabis.
However, any restrictions imposed on cannabis without an exception for medicinal purposes could be subjected to challenges under the human rights legislation and may be found unenforceable.