legalization IS HERE.
But that doesn’t mean grow-op disclosure goes out the window or that there aren’t any problems associated with it.
The Cannabis Act was enacted on October 17, 2018 and households can legally have up to four cannabis plants each – with the exception made for those who have a license to grow medical cannabis.
Legal or illegal, a buyer might ask “Has cannabis been grown on / in this property?” Even if legal growing has occurred, it could negatively affect property value, resulting from practical considerations of moisture, mold, and structural and electrical damage leading to a stigma attached to the property.
If you are a Seller, your Realtor will review with you the common law duties of disclosure to any Material Latent Defects (MLDs) that can make a property unsafe.
You and your Realtor should be familiar with the Real Estate Council of BC’s FAQ’s regarding the duty to disclose the current or past presence of cannabis plants.
If your situation doesn’t fit into the scenarios presented by the Councils’s FAQs, seek legal advice.
Some ways you could put a buyer at ease would be to get an air quality assessment and environmental report. If there was damage, do a clean up and remediation.
How far back should your Property Disclosure Statement go? It’s “Any Knowledge” as far back as the current owner is aware of.
A Property Disclosure Statement should also include: “Are you aware if the Premises have been used to grow cannabis (other than as permitted by law) or to manufacture illegal substances?”
A Buyers Realtor will usually have a thorough conversation with you about what type of questions to ask about a property you are viewing. Some concerns could include:
- Ability to qualify for mortgage financing or property insurance
- Any MLDs could be expensive or impossible to remediate
- This includes electrical, safety and / or mold issues
- Valuation of the Property and resale
- Potential for criminal activity
A buyer’s Realtor can recommend a contractual warranty clause respecting the manufacture or growing of illegal substances should be included in the Contract of Purchase and Sale (CPS).
Talk to the experts, document everything, get everything you can in writing.
There were two cases decided by the BC Supreme Court in 2019 that illustrate potential pitfalls when dealing with properties where cannabis was grown.
Note: both these cases pertained to transactions that took place prior to the enactment of the Cannabis Act but there is no reason to believe they would be decided differently today.
In Beacock v. Moreno, 2019 BCSC 955, the buyer sued the sellers and the limited dual agent for failure to disclose the prior use of the property as a cannabis grow operation.2 After purchasing the property in 2005, the buyer had undertaken extensive mold remediation.
The Court found that the agent could only have known about the prior grow op 1) from any prior dealings with the property, 2) from the sellers, or 3) from any obvious signs at the property which would indicate there had been a grow op. The agent was found not to have had any knowledge or reason to suspect a prior grow op in the circumstances.
The buyer was unsuccessful against the limited dual agent in this case but was successful against the sellers in fraudulent misrepresentation. The sellers, who did not appear at trial, were held to have had knowledge of the grow op from the Property Disclosure Statement they had received in their purchase of the property only a year earlier, in 2004.
In Owen-Jones v. Vasir, 2019 BCSC 2002, the buyer attempted, unsuccessfully, to avoid the consequences of his own failure to complete the purchase of a home in Delta.1 When the seller sued, the unrepresented buyer argued that there had been an undisclosed cannabis grow operation at the home, and he was therefore entitled to the return of his deposit. The buyer also counterclaimed against the seller’s real estate agent, alleging non-disclosure of the grow op.
The Court found that the seller’s agent had disclosed verbally to the buyer that there had been an incident involving damage caused to the home by a tenant, allegedly connected with a cannabis grow op, some eight years earlier. The Court found this was not a representation made by the seller’s agent and was instead simply a statement of the seller, conveyed through the agent. There was nothing false or misleading about the statement. In the result, the seller was entitled to keep the deposit and consequential damages, and the buyer’s claim against the seller’s agent was dismissed.