Make Sure Property Values Don’t Go Up in Smoke Image

Make Sure Property Values Don’t Go Up in Smoke

By Sam R on Nov 11, 2014

With the municipal election behind us, it’s time to look forward to other elections and see what may be in store for us depending on who is voted into power. The U.S. recently held its mid-term elections and though it doesn’t really impact Canada to any great length, there are some interesting trends we can look at to see if there are things we should be thinking about.

One of the hottest topics right now is marijuana legalization and you’re probably thinking, “What’s that got to do with a real-estate column?” Plenty, apparently, if you consider what was said at the recent 2014 REALTORS Conference & Expo in New Orleans, according to a story in Digital Journal.

Although the organizers — the U.S.’s National Association of Realtors — have no policy or position on the matter, half its members work in jurisdictions that allow for the medical or recreational use of marijuana. And that does impact the membership when it comes time to represent clients in finding a property for purchase or rent.

"While the legalization of marijuana has more obvious implications for residential and commercial property managers who have to deal with a variety of landlord-tenant issues, it's also creating challenges for community and condominium associations and federally assisted rental housing," Megan Booth, senior policy analyst for the National Association of Realtors, told attendees at the conferences’ "Medical Marijuana Laws Impact all Real Estate Transactions" session.

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In Canada, the major concern is that federal law permits the possession and use of medicinal marijuana, though a production permit is needed to grow the plants. But what if a residential, commercial or industrial tenant has such a permit? Grow-ops (legal and illegal) are becoming an increasing challenge for police forces, and landlords and property managers are becoming increasingly vigilant for activity that could impact their properties in terms of damage and criminal activity. The Canadian Real Estate Association created an information pamphlet in partnership with the RCMP to explain the implications of grow-ops.

When it comes to use, there isn’t much to consider because many jurisdictions already prohibit smoking in workplaces, and besides a handful of buildings, tenants can smoke in their units because the laws don’t apply to residential buildings (outside of common areas).

When it comes to production, the main impacts are the alterations these properties go through (such as venting to the exterior of the structure, and air ducts to recycle air within the structure) in order to facilitate the growing of marijuana plants, and the demands on utilities (most notably electricity).

Illegal operations have in recent years migrated to suburban neighbourhoods, where they have a better chance of escaping detection by law-enforcement agencies. Legal operations tend to be smaller in scope, since licences put limits on how much can be grown for “personal” use. These will gradually be phased out of residential buildings due to legislation introduced in April 2014.

Regardless of what the law states, though, realtors now have to be more vigilant in order to spot signs that the property they represent or are showing may have been tied in some way to marijuana use and/or production, and pass on that information or concerns to buyers.

And, of course, there are also ethical considerations when it comes to representing sellers and buyers to ensure that potential clients have all the pertinent information they need to make an informed decision on what they are purchasing or renting.