Marijuana – 2019

BY: JAY BRIJPAUL

It is now legal to grow up to four marijuana plants in Ontario homes. Joanna, a first-time buyer, is concerned because a home with marijuana plants has a stigma. A few years ago, I sold a triplex in south Etobicoke where one of the tenants were caught growing marijuana. The police raided the home and it was on their registry. Such stigma is a material fact and must be disclosed but in the process of doing so, the home remained unsold for over five months. The seller had undergone a life-changing event and had to dispose of the property. Eventually, a buyer purchased it, but the banks refused to finance the purchase. The property was finally sold for about two hundred thousand below market value.

Stigma is a stain on a property that creates a negative response from future buyers. For example, a home where a murder or suicide was committed. In the above case, buyers were scared to buy the home although it was in perfect condition. The bank refused to finance the property because they used the same yardstick to determine which home to finance. Now that it is legal to grow a few plants, the banks might change their policy.

The key problem with marijuana grow operations is that the home is used for large scale production. Growers mimic the conditions of the tropics with long hours of sunlight and a very damp atmosphere. High powered lamps that consume large quantities of electricity are used. The growers, to avoid detection, illegally bypass the hydrometer. Plants, through transpiration, draw water out of the soil and release it into the air. In the process, the plants grow at an accelerated rate and produce a hefty crop. The same environment, with heat and moisture, will cause toxic mold to grow. Mold will grow anywhere there is air. A moist substrate such as beams in the attic and behind drywalls provides fertile ground. These homes must undergo remedial treatment to restore them back to normal condition. This can be a costly process depending on the extent of damage and therefore banks may refuse to lend.

I sold a home that underwent remedial treatment. The owners lived in it for about five years. Since this was a material fact known to the owners, it was disclosed. The home was stigmatized, and the banks refused to finance it even after five years. Ontario courts ruled that the sellers had the option to not disclose the history of a property during their ownership of it even if there is a stigma. They may not know what exactly happens to a home prior to their ownership. However, a buyer can sue the seller for non-disclosure although the lawsuit may be unsuccessful. Court proceedings can become a long and expensive process. Now that it is legalized, most of the stigmas will disappear and it will become a win-win for everyone.

It’s a win-win for the government because now, consumers can buy their products legally and the government will receive revenue. Since there would be major players in production, homegrown operations would not be profitable and would fade out. Since everyone can grow a few plants, it would become a house plant and the stigma will soon disappear. Buyers who do not want to purchase a home that marijuana has been grown must let their representative know. The representative can incorporate that into the purchase of sale agreement. Buyers can simply conduct an online search of the address to see if there is any stigma or obtain a police record. It would reveal only major operations and not small scale.

It is too early to know the sequel. My advice is to look at the bigger picture. As a buyer, if it’s a good deal, don’t worry about the stigma and as a seller, don’t worry about the history you had no control over.