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How Cannabis Legalization Can Affect Real Estate

Blog by Doriana Zohil-Morton, Broker of Record/Owner | January 17th, 2019

On October 17, 2018, the Cannabis Act came into force in Canada. Cannabis is now legal for both recreational and medicinal use (though medical use was legalized back in 2001). The rules for usage is quite similar to alcohol, though many have expressed concern about how cannabis can affect Toronto & GTA real estate. For individuals moving to Toronto or relocating to Toronto from outside Canada, there are a few things you need to know.

Let’s break this down. In Ontario, individuals 18 years or older can now possess up to 30 grams of legal cannabis, and can grow up to 4 plants per residence for personal use (not per person). You heard that right, cannabis can now legally be grown in a personal residence!

Real estate investors have expressed concerns over the cultivation and smoking of cannabis in their investment property. One way to address this is to put restrictions in place in the lease that prevents smoking or cultivation within the rental property. If the investment property is a condo, condo by-laws will only help to solidify these restrictions as currently all condominiums prohibit smoking in common areas of the building, in accordance with the Smoke-Free Ontario Act which came into force in 2017. Many condo boards are taking a step further and amending their by-laws to prohibit cultivation within units and smoking on balconies, both of which create a fire hazard due to electrical overload of circuits and lit buts being discarded improperly, not to mention the nuisance of smoke transfer between units.

Home buyers are also concerned about cannabis being grown within a home of interest. These concerns include mould, fire and water damage, and much more. This is confirmed by Zoocasa, which recently completed a study that found 52% of Canadians are less likely to buy homes where pot was grown. Home buyers are urged to ask probing questions and add conditions into their offer to purchase if they feel strongly about this issue. This is where an experienced Toronto real estate agent becomes invaluable, as we know what questions to ask and what clauses to use to help mitigate issues such as this.

Somewhat related, is the issue of insurance. Insurance providers have been providing discounts to non-smokers for years. History and statistics have proven that smoking within a home increases fire risk. Most policies have also had terms that void coverage if cannabis is cultivated within the insured property, namely due to the increased risk of fire, burglary, vandalism, water damage, etc. It’s unclear at this time if insurance companies will amend their policies to allow for the 4 legal plants, but it is clear insurers are still a bit nervous, much like home buyers are.

Having said all that, medical cannabis users can be exempt from restrictions if they have evidence from an accredited medical professional.

It is safe to say that the legalization of recreation cannabis will take some getting used to, and only time will tell how this will impact Toronto and GTA real estate. Toronto realtors such as the team at MAC Real Estate Services Inc., Brokerage are your best protection during the buying and renting process. Moving to Toronto? Looking to get into real estate investing? Give us a call, we have your best interests at heart and will ensure you are protected during the real estate process.

We’d love to hear from you, so call us today to book your complimentary private consultation.