Disclosure of Former Grow-Op (Ontario)

By
Commercial Real Estate Agent with RE/MAX West Realty Inc., Brokerage (Toronto)

Disclosure of Former Grow-Op (Ontario)

This is the current view of RECO on this point. It’s becoming quite topical with the introduction of legal cannabis on 17 October 2018.

This is the Ask Joe Column on 5 October 2018:

With marijuana about to be legalized, I’m concerned about buying a former grow-op. Does the seller need to disclose this information?

In most cases, probably not. But the disclosure of such information is a decision that a seller needs to make after consulting with their real estate salesperson and a real estate lawyer. To be clear, I assume you mean a property where many plants were grown because the new laws will permit the home cultivation of just a few plants.

A home seller does not have to divulge a grow-op was run on the property, Ontario’s courts have determined.  

Under the current laws in Ontario, a property seller is not required to disclose the personal history of their home, even if it carries a psychological stigma: a non-physical attribute that could trigger a negative emotional response from potential buyers. For instance, a charming lakeside cottage was the site of a murder, or an unassuming bungalow in the suburbs that was the childhood residence of a serious criminal. A home that once housed a marijuana grow-op that has since been cleaned up and declared safe for habitation could be considered stigmatized.

The courts have ruled that a seller doesn’t have to disclose an identified stigma to potential buyers — although some may do so out of a sense of moral obligation, or to avoid potential lawsuits. If you’re concerned about purchasing a home that was once a grow-op, it’s important to perform your own due diligence. That means:

  • Hiring a qualified home inspector to check out the property and making your offer to purchase conditional upon it passing inspection.
  • Conducting your own research — speaking with some of the neighbours and doing some research on the street address.
  • Working closely with your real estate salesperson to formulate questions for the seller and their representative.

The seller may direct their salesperson not to disclose a particular stigma. But the Real Estate Council of Ontario’s (RECO) code of conduct forbids a seller’s rep from being untruthful if they’re asked a direct question about a property. They are, however, within their rights to decline to answer and suggest you look into it yourself. And that’s a good reason to only buy, or sell, properties through registered real estate salespeople or brokers: the industry is committed to upholding the code and understands there are consequences for breaching it.

As I have previously written, the exception to Ontario’s real estate information disclosure laws are latent physical defects the owner knows about that could make a property unsafe or uninhabitable; these must be disclosed to potential buyers.

How does that relate to cannabis cultivation? Grow-ops can generate a lot of moisture which may lead to mould infestations, and they may have undergone potentially unsafe electrical modifications. A seller who believes their home could have a serious defect should discuss disclosure options with their salesperson and their real estate lawyer.

COMMENT

This is actually a “Yes” and “No” answer. Yes, if the presence of the plants have caused mould and physically damaged the property and No, if it’s just all “psychological”.

The new legislation will permit 4 plants, That’s not really any big deal. But, 100 plants would cause mould and that would damage the property, rendering it structurally unsound and likely also rendering the premises unfit for human habitation.

There are naturally factors to be taken into consideration:

  •         Number of plants
  •         Length of time
  •         Amount of water supplied
  •         Temperature inside premises
  •         Amount of ventilation and air-conditioning
  •         Type of surrounding area, and materials present
  •         Monitoring of conditions

The Stigma

The stigma enough is sufficient to have both mortgagees decline loans and insurers decline coverage.

That’s problematic.

A property worth $1million in a subdivision, the same as every other house would only be worth $600,000 if this fact were known. The reason is simple: you can’t get a mortgage or insure it.

The preferred solution is simply to demolish the building and start afresh. No amount of remediation really will work.

 

 

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