Remediation Standard for Legal and Illegal Substance Affected Properties
Currently, if a home or commercial property has been identified as being used to cultivate or manufacture drugs, illegal or otherwise, it would not be financeable by a mainstream conventional mortgage due to a lack of a standardized remediation schedule that is universally acceptable to lenders and insurers.
Compounding this problem, it is increasingly more difficult and/or costly to insure these properties which in some cases makes alternative financing altogether cost prohibitive because of the same lack of standard. Given the number of illegal marijuana grow-ops which have been identified to date, and the number of Health Canada Licenses having been issued for Personal Use (PUPL) and Designated Personal Use (DPPL), it is reasonable to say that this lack of acceptable standard poses a substantial risk to the financeability of a significant segment of our residential housing stock in British Columbia.
Although much attention has been paid to the real estate market in the Greater Vancouver area and the Fraser Valley region, this is a province-wide problem. Non-financeable homes pose differing difficulties to various parts of British Columbia. For example, in Quesnel and other similar economic regions, homes are often being left abandoned and are unable to be re-introduced in the housing supply. Whereas in areas such as the Fraser Valley, which traditionally attracts new homebuyers with more affordable homes as an extended suburb of the Metro Vancouver region, the decreasing stock of mortgageable properties is making it increasingly difficult for these home seekers to make a purchase. A Freedom of Information request made by the District of Mission in 2013 uncovered that their community had 583 PUPL and 73 DPPL licenses and an additional 671 ATP (Authorized to Possess) licenses covering a population of approximately 34,000 residents and between 15,000-18,000 residential homes.
As a secondary concern, but no less alarming, the homes across the province that cannot be sold and reintroduced into the housing stock legitimately (and with full remediation) have the potential to be sold privately to unsuspecting buyers after the seller has done some marginal repairs to the home. This problem is not only affecting the current availability of homes, but is also a public safety concern since we have no standardized schedule of remediation.
Further background research to illustrate the problem include quotes from financial institutions:
- "We will not enter into any credit deals that have been deemed as current or previous operation (illegal substances)". "Even if the Structure is torn down, the property remains tagged and we still do not fund these credit deals"
- "If we know about the issue (former or current illegal substance operations) at the start of our interview process, we don't proceed with the application."
- "All chartered banks and most single stream mortgage lenders will not finance former illegal substance operations such as grow-ops." "In most cases with alternate financing, more than a 50 percent down payment is required and some level of underwriting is required."
- "I have one regular homeowners market that will insure a former grow op." "No matter how long ago they require Current Air Quality testing provided by a qualified contractor with CGL in place, current Electrical passed permit by someone with a CGL in place and current personal inspection by the broker, no matter how long since the grow-op."
While this challenging problem to our housing stock has received limited attention from a few individual municipalities, the organizations that are directly involved in the housing industry, such as the BC Real Estate Association (BCREA) and BC Homebuilders Association, have been actively advocating for provincial government intervention. To date, there remains no consistent or universal policy that will satisfy the needs of potential buyers, financial institutions or insurers in any meaningful way.
We believe the only way to sufficiently address this situation is for the Government of British Columbia to take a lead role in developing the necessary standards. Exemplifying an example of this, the Government of Alberta has shown excellent leadership regarding this concern. Prior to the last Alberta General Election, the Grow-Op Free Alberta Final Recommendations Report was adopted in 2014 containing 37 recommendations that encompass the health, safety and remediation challenges residential grow operations pose to current inhabitants, potential buyers and the community and province as a whole. The B.C. government could certainly use these recommendations as a firm starting point.
THE CHAMBER RECOMMENDS:
That the Provincial Government and Federal Government develop a comprehensive remediation standard to secure the conventionally available housing stock affected by the legal and illegal manufacture or cultivation of substances, which will satisfy the needs of the industries affected including the real estate, financial, insurance and construction related industries and the clients they serve.