New verification, disclosure and advice challenges for brokers following the coming into force of the Cannabis Act
The Cannabis Act (“Federal Statute”)1 and the Act to constitute the Société québécoise du cannabis, to enact the Cannabis Regulation Act and to amend various highway safety-related provisions (“Provincial Statute”)2 aim to regulate the production,3,4 possession and consumption of cannabis. These statutes and related regulations came into force on October 17, 2018.
Consumption is legalized, but the production of cannabis for personal use will remain illegal in Québec, regardless of the number of plants. Only individuals who are authorized for medical purposes may produce cannabis and are provided with a certificate attesting to this fact.
Under this exception, certificate holders may produce cannabis inside or outside of an immovable. The amount of cannabis is determined by the certificate holder’s doctor. A copy of the registration certificate must be kept at the location where cannabis is produced for medical purposes.
However, this production is subject to certain restrictions, including the obligation for a lessee to have the written consent of the owner, a ban on production near certain locations (schools, daycares, playgrounds), and the obligation not to exceed the number of plants specified on the certificate.5
For leased properties, since October 17, 2018, lessors have 90 days to add a clause to their current leases prohibiting their lessees to smoke cannabis on the premises. Starting on January 15, 2019, lessors who wish to add such a clause to their current leases will be required to do so in the same way and within the same time constraints as apply to any other amendment made to their leases. Lessors may also include a clause prohibiting the smoking of cannabis on any new lease.
Likewise, co-ownership by-laws may restrict or prohibit the consumption of cannabis in various forms.
Given these changes, real estate brokers are required to ask new questions, make additional verifications and disclose information in order to properly advise their clients. They must also need to make sure that potential buyers make an informed decision by being aware of all the factors that could adversely impact their real estate transaction. Buyers concerned by the odours created by cannabis production or consumption must make this fact known and ask question of the seller’s broker, who will have to take additional steps to make sure the buyers have all the information they require.
Brokers must therefore make verifications, inform their clients of the information obtained, document their files by procuring the required copies, and make sure the following elements are entered on the form Declarations by the seller of the immovable (or the form Declarations by the seller of the immovable – Divided co-ownership in the case of a divided co-ownership property). Both forms are published by the OACIQ and are mandatory for the sale by an individual of a residential immovable containing less than 5 dwellings or of a divided co-ownership property:
For any immovable
- Past cannabis production or cultivation:
- Verify previous seller’s declarations;
- Where previous declarations mention the production or cultivation of cannabis, verify courthouse penal registries or the web for charges laid and search warrants issued in relation to the immovable. Take note of the nature and quantities of drugs and the equipment seized.
- Current production or cultivation of cannabis (regardless of the number of plants)
- Verify with the seller whether production of cannabis is taking place on the premises, regardless of the number of plants;
- Verify with the seller whether there are or have been odours, smoke or other problems (including complaints) in connection with the production or consumption of cannabis;
- In cases where production is authorized for medical purposes, verify the certificate to this effect, the number of plants allowed and the premises where production is authorized.
In addition to the above, the broker must make the following additional verifications when the transaction concerns an income property or a co-ownership property:
For income properties
- Clause in the lease prohibiting the smoking of cannabis:
- Verify the leases and be aware of any amendment made up to the signing of the deed of sale.
- Written consent by the lessor allowing the production of cannabis for medical purposes.
For co-ownership properties
- Clause in the co-ownership’s incorporation act, by-laws or co-owners’ agreement prohibiting the production or consumption of cannabis:
- Verify the co-ownership’s incorporation act, by-laws or co-owners’ agreement and be aware of any amendment made up to the signing of the deed of sale.
--------------------------------------
1 C.A. 2018, c. 16.
2 2018, c. 19.
3 Production refers to the cultivation, transformation, packaging and labelling of cannabis.
4 In the federal and provincial statutes, the word “dwelling-house” includes the subjacent and adjacent land and the building, and any structure erected thereon.
5 Cannabis Regulations, DORS/2018-144, s. 312.