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Legal Marijuana: Is your Investment Going Up in Smoke?

Written By: Baron Alloway

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International and domestic purchasers of properties for the purpose of renting should know the impact of the Cannabis Act, 2017, which legalizes the cultivation and use of marijuana. Unchecked cannabis usage can reduce the value of your investment.

Most rental units are condominiums, and sharing space with others who intend on cultivating and/or using marijuana can be a problem. Condo boards can either decide to do nothing and rely on existing bylaws, rules and regulations, requiring owners not tocause nuisance to others, or change the condo rules. The new law allows the smoking of cannabis where you can smoke. Accordingly, condo boards may determine to make the entire building “Smoke-free” and grandfather anyonewho is smoking on the date the new rule comes into effect, with the understanding that this will end if the unit is sold. Medical exemptions may be granted on very specific terms.

If a unit is already rented, the tenant will likely have acknowledged that they agree to abide by the rules of the condominium corporation now and in the future. A tenant’s failure to comply with new rules regarding cannabis can lead to eviction by either the condominium board or the landlord, if they can demonstrate that the tenant is either bothering other tenants or damaging property.

There are clauses for new leases which provide the Landlord/owner the protection they need; make sure your lease agreement is updated. Your condominium board is your first and best line of defence when dealing withcannabis issues.

Finally, insurance requires disclosure; cultivation of cannabis plants increases the risk of damage to your property. Risks can range from water damage, mould, fire, and even burglary. Four plants per residence is legal but technically five plants is a “grow op”. Failure to disclose and take measures may result in your insurer denying coverage. You get what you inspect, not expect when it comes to this new legislation. The Landlord and Tenant Act allows for periodic inspections of the rental unit to ensure compliance and reduce the insurance risk.

Graham Alloway is the founder of both Catalyst Real Estate Brokerage Ltd. and the law firm Alloway and Associates Professional Corporation, a distinguished firm with over twenty-five years of experience in the areas of real estate, banking and finance, and corporate law.

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