Pubdate: Sat, 25 Jun 2016
Source: Vancouver Sun (CN BC)
Copyright: 2016 Postmedia Network Inc.
Author: Matt Robinson
Page: A10


When James Silver and his wife bought their Vancouver home about a
dozen years ago, it was in need of a major renovation.

That suited Silver, a handyman who over the next decade reduced the
former marijuana grow-op to its foundation and frame, then rebuilt it
into a stylish five-bedroom, three-bathroom home plus suite. It was
nearly brand new by the time he was finished with it.

But when he and his wife tried to sell the home this spring, banks
balked at lending to prospective buyers.

"We were blindsided by it," Silver said.

"We've completely rebuilt the house … and we have nice families who
want to buy our house who cannot get financing."

That's because Silver's home, despite being completely renovated and
certified safe by the city, is permanently stigmatized by its grow op
history. It's a past that makes the house difficult to sell, finance
or insure.

Moreover, thousands of other homes across B.C. - including at least
2,450 in Vancouver alone - are in a similar bind.

Banks may shy away from lending on former grow-ops because there are
no consistent rules for remediation and a lingering fear that mould
could appear and taint the investment. While some municipalities, like
Vancouver, have rigorous rules around the renovations required for
reoccupation, others do not.

Vancouver-based mortgage broker Michael Fortin said he hears from
prospective buyers of former grow-ops every month or two. The homes
tend to command a lower price, so bargain hunters often spot them.
About a decade ago, lenders started to back away from the homes,
Fortin said. When asked what changed, he said he didn't know.

The Sun reached out to RBC, CIBC, TD Bank, BMO, Scotiabank, Vancity
and Coast Capital Savings for comment on their lending practices for
former grow-ops. Only a few responded.

Bruce Schouten, the chief risk officer at Coast Capital Savings,
explains there has been an increase in the number of former grow-ops
coming onto the market.

He attributed that increase to former federal medical marijuana access
regulations that allowed patients - or a person they designated - to
grow their own supply. Eventually, the homes used to grow that pot
make their way to market, the theory goes. But there's also been an
increase in buyer interest.

"In the past, many home buyers wouldn't have touched a former grow-op,
but in today's market - and particularly in Metro Vancouver - they
can't afford to be squeamish," Schouten said in a lengthy written reply.

"This leads to a scenario where financial institutions are suddenly
being asked to take on a higher ratio of riskier investments."

>From a lender's perspective, the perceived risk of mould and ongoing
stigma could make it hard to recoup a home's value on resale.

"The big banks often choose to avoid the potential headache," he said,
adding that they "aren't as tied to the welfare of local communities
as credit unions are.

"It may seem surprising, but there is also a reputational risk for
financial institutions considering financing former grow-ops."

Schouten said his credit union will lend on former grow-ops, but it
requires them to be fully remediated and certified safe. Buyers also
need high-ratio insurance from the Canadian Mortgage and Housing

Janet Boyle, Scotiabank's vice-president of real estate secured
lending, said her bank has financed remediated properties. But it
requires an environmental assessment, appraisal and confirmation that
proper building and occupancy permits were issued. Scotiabank also
caps its loan at 65 per cent - meaning buyers need to put at least 35
per cent down - and all mortgages need CMHC insurance.

For typical homes, buyers can put as little as five per cent down with
CMHC insurance, according to the Canadian Bankers Association.

Vancity responded to say it will also lend, but only after strict
guidelines are met.

Prospective buyers who find financing are regularly charged higher
rates - some banks ask for an additional one per cent, but that
varies. When buyers cannot find a willing lender, sellers have to rely
on cash sales, Fortin said. There are ways around the lending problem,
but they take some footwork and the right buyer.

For now, the only certain way for an owner to free their former growop
of its stigma is to tear it down and rebuild.

That could make sense if the grower "put a foot of soil on the floor
base and totally destroyed the house," as Fortin said. But "if it's a
bathroom with three plants in the bathtub, who cares? Grandma could be
growing tomatoes in there."

The lack of standardized methods for classifying, identifying and
remediating former grow-ops is a problem, said Robert Laing, the chief
executive officer of the B.C. Real Estate Association.

"Depending on where you are, the property may be deemed to be
remediated if it's been painted," Laing told the Sun. Some communities
may not have a designated process for remediation at all, according to
the association.

Property disclosure statements - which must be completed before a home
can be listed on the MLS system - ask a seller whether they are "aware
if the Premises have been used as a marijuana grow operation." It's
not the kind of thing sellers will want to hide. An Alberta couple
recently filed a lawsuit alleging a $3-million Langley home they
bought in May had a grow-op past that had been concealed from them.
Laing's group has been pushing Victoria for province-wide rules on
identification and remediation of grow-ops. "From a real estate
perspective, there's just no consistency or standardization, and that
puts everything at risk from a buyer's perspective."

The group's recommendations have not been enacted by the province,
which has neither the right tools nor the responsibility to deal with
the problem, according to a statement from the Ministry of Natural Gas
Development and Ministry Responsible for Housing.

"Local governments have the authority to monitor and ensure the health
and safety of existing buildings in their communities. They can issue
and revoke occupancy permits, set standards of maintenance and inspect
the completed work," reads the statement. It goes on to note there are
national guidelines for safe reoccupation of former grow-ops that can
guide local governments.

Mark Roozbahani, Vancouver's assistant director of building
inspections, detailed stringent conditions that must be met before the
city will issue a reoccupancy permit.

"Our inspectors are very experienced," Roozbahani said. "We don't give
those types of assignments to new people who come to the city."

Owners need to pay about $3,000 for building, electrical, plumbing and
property use inspections and a dismantling levy. That's in addition to
any repair work that's needed.

The worst cases have electrical or gas problems - "an imminent risk to
people living there," said Roozbahani, who is trained as an engineer.

Then there is mould. It's a health hazard, but not one that's limited
to grow-ops. "Probably if you look at any (older) house in the Lower
Mainland, they may have some sort of minor or major issue."

After mould is eliminated and air ducts, carpets and curtains are
professionally cleaned, a qualified environmental consultant is
brought in for an air quality test. Owners are then charged $155 for a
reoccupancy permit, which indicates the home is safe for people and
complies with all bylaws.

When asked if he would live in a former grow-op, Roozbahani said he
would. "If the city issues a reoccupancy permit, I would not be concerned."

Silver's home renovations were done in 2012. He met all of the city's
conditions and said if there was a problem with his house, he would
have seen it by now.

The home sold about a month after it went on the market and after
considerable effort from the buyers. "It looks like they went through
a fairly heroic effort to get financing and home insurance signed
off," Silver said.

In his opinion, the house sold for less than a comparable home with a
different history might have. That has a particular sting for Silver,
who had no trouble borrowing to buy the home in 2003.

"We didn't even imagine it would be an issue," Silver

If given a chance to go back, Silver said he would have done things

"I wouldn't have bought the house," he said. "Had I known that the
goalposts were going to move, why would I?"
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MAP posted-by: Matt