| Homeowners

So legal pot, are we right? From weed stores popping up throughout Toronto in anticipation of legalization, to parental fears their kids will be in danger when it is finally sold in stores, Toronto might be wondering just what we can expect once legalization kicks in. Here’s a “high” level look at how Ontario weed laws will affect Toronto real estate.

What are Ontario Cannabis Laws & When Will Weed be Legal?

As of October 17, 2018, cannabis will be legal in Canada with a few caveats. First, it’s legal only for adults 19 and over who’re limited to possessing up to 30 grams of marijuana. It’s also legal for each household (this isn’t per person, but per home) to have as many as four pot plants within the home or garden which is kind of interesting when you consider that apparently, one pot plant can yield as much as a pound of weed in the right conditions. A bit over the 30 gram level guvna!

So how does one acquire this legal marijuana in Ontario? The Ford government raised a little hell when they made some changes to the Ontario Legalization Plan. People were expecting to purchase marijuana. On the date marijuana is legalized, Ontarians will have to purchase their weed online, with the goal of allowing licensed dispensaries to sell it in brick and mortar shops as early as April of next year (or so they have projected). Seeds to grow legal marijuana will also be available for purchase online. What you won’t be able to purchase or even legally consume will be edibles. (Wonder if this has anything to do with the two Toronto police officers who called 911 after consuming stolen edibles?)

Much like alcohol there’re limits to where you can consume pot. You’ve got to be in your home or backyard, and cannot consume it while driving, while at work or while in any public spaces. To make it a little more complicated, although it’s legal to consume marijuana on your own private balcony, your condo rules or lease agreement might beg to differ. So, make sure you understand the restrictions if you live in a multi unit condo building! 

That brings us to our next section, which is understanding your rights as a landlord or condo owner when it comes to Ontario weed laws.

The Landlord, the Chill Tenant and the Condo Board

You might ask yourself, “Why would a landlord care about cannabis legalization?” And the answer to that is quite intricate. From pot smells in the carpet to increased hydro usage for people growing pot plants at home, there’re many implications for the landlord to consider. In fact, not only landlords, but condo boards need to give some thought to what they want to do when it comes to cannabis.

But can landlords say no smoking in Ontario? Some ideas that condo boards are kicking around include going completely smoke-free, while others might depend on nuisance rules to provide a loophole for marijuana issues. A challenge with no smoking rules is that landlords and condo boards could face issues with the non-smoking clause if they’ve got smokers currently living in the building. So, in this case smokers might have to be grandfathered into the new rules. If you’re a landlord, make sure you provide any new rules enforced by your condo board to your tenants and have them sign it to show they were aware of the changes.

Landlords can consider some of these same tactics and can legally depend on Section 10 of Ontario’s standard Ontario Residential Tenancy Agreement to allow them to add a no smoking policy for the unit. Of course, enforcing such a rule is another story!  

Whether you’ve smoked pot and didn’t inhale, are a big fan of it as a recreational drug or have never had any interest in it at all, you know that pot smells. It’s no different than cigarettes and will cling to everything in the home which could add to your cleaning bills including the potential to replace carpets, drapes and even repaint. Your protection here is Section 13 of the Ontario Residential Tenancy Agreement which places the onus on the tenant to repair or pay for damages they cause in the unit. This includes damage that might be caused by guests or roommates who might not be on the lease. 

You could run into challenges in adding anything related to marijuana in your lease with the intro of the standardized lease, but you can certainly find out what you can add to protect yourself from the potential issues caused by both using and growing weed in your rental home.  

If you include utilities in your rent, you might want to consider adding a ‘no grow’ rule to stop tenants from using up hydro to grow marijuana. Not only does it use up hydro but can also lead to many issues including smells (apparently you don’t have to smoke it to get that smell in the home) mold and fungus caused by the dampness required to grow the pot and even potential complaints from fellow tenants who might complain about issues such as noise from pumps and ventilation. You’ll also want to speak to your insurance company to find out if there’s anything you need to add to your plan to cover marijuana related issues.

Grow “Op”portunity

So, carrying on with this whole growing four pot plants per household rule. Whether you’re a landlord or a home owner, the rules can lead to issues. In the case of a landlord, if you own a multi unit condo building you could see each unit with four plants of their own and this could really add up depending on the size of your property. The problem here, and this becomes the same problem that home owners can run into, is that you’ll want to know the disclosure laws around grow-ops when it comes time to sell. 

Be aware that the Ontario Real Estate Association (OREA) is urging the Provincial Government to ensure home buyers have protection from associated risks with growing pot inside. OREA believes that legalization will lead to an increase in pot “farming” in homes causing a number of potential issues including mold and fungus growth, as we’ve already mentioned. Health risks from mold and fungus can be pretty serious and therefore OREA feels the government has a responsibility to limit the cultivation of marijuana indoors to protect home buyers from the potential negative effects. 

When pot was legalized in Denver, Colorado there was a “significant increase” in home grown pot AND the RCMP is not convinced the laws will wipe out issues with cultivation for the purposes of selling illegal pot by organized crime.

With all these facts in mind, OREA proposes five policy changes to protect consumers from purchasing a former grow-op which we have quoted here:

  1. Designate illegal grow operations as unsafe under the Building Code Act.
  2. Mandate that illegal cannabis operations are inspected by a municipal building official.
  3. Require municipalities to register remediation work orders on the title of a former grow operation.
  4. Mandate that all licensed home inspectors receive training on how to spot the signs of a former marijuana grow operation.
  5. Restrict the number of plants that a home owner can grow from four to one in units 1,000 square feet or smaller.

What Canada Can Learn From Colorado Legalization

In Colorado, marijuana was legalized in January 2014 providing insight into what can potentially occur in Toronto. Interestingly, two separate studies showed that homes located near marijuana stores actually rose in value.  

The first study was conducted by Real Estate Economics headed up by James Conklin. They looked at single-family homes and those which were located within 0.1 mile (528 feet) of a recreational marijuana store saw an 8 per cent increase compared to homes located farther away. These stores were formerly medical marijuana stores which might make a difference. As well homes that were between 0.1 mile and 0.25 mile from a converted store didn’t see the rise, so it seems the testing was extremely localized. 

The second paper published by Economic Inquiry and headed up by Cheng Cheng found that there was a 6 per cent premium for homes sold in municipalities around Colorado that legalized the sale of marijuana which is pretty close to the 8 per cent of the first study. They were more detailed and looked at properties that sold more than once to see if their findings were sound. 

So, with a wait until next spring in the works for Torontonians to see brick and mortar stores in their neighbourhood, should we be hoping that a pot store will pop up on the corner? Probably not. There’s the possibility that buyers in the studies had no idea there was a pot store nearby. As well, homes around marijuana dispensaries had seen a price decrease before pot was legalized and it’s possible that for whatever reason legalized pot stores might have been viewed with less distain than medical dispensaries. 

Commercial Real Estate Boom

There’s another consideration that can affect Toronto real estate. Colorado saw a rise in demand for both wholesale and retail space and it goes to reason we will too. Commercial space will have to meet government requirements which means those who’re able to meet the demands could even see people offering to buy their commercial properties instead of renting. 

The reason for the sudden onslaught of interest in purchasing commercial real estate versus renting a space for a pot shop is due to regulations and limitations that’ll affect the space for the purposes of selling marijuana. There could be implications that include security and zoning as well as other specifications that’ll ensure the shop owners are compliant with the laws. 

With all of these factors at play, it might make more sense for the purchase of a space when you consider the amount of investment required to get the space into shape to meet the requirements for cannabis retailers. As well, with the investment required, the idea of potentially needing to relocate their shop due to changes in rent, or the landlord wishing to sell becomes an expensive prospect once they’ve made investments to make the space compliant. 

Commercial property owners stand to capitalize on their space if it happens to hit all or most of the requirements as their space will be highly desirable (no pun intended). Some commercial space owners might even consider looking into local regulations and see how many of the requirements they can check off the list. With the demand for such spaces, they’ll be able to capitalize on cannabis legalization by promoting their space as an ideal option. They could even consider investing in changes to their properties to help check off all the requirements and make their chances of profiting from the rules more likely.

Love it or hate it, cannabis is here to stay in Ontario. The full implications of what it’ll mean to real estate are yet to be seen!