IN 2012, Colorado made world wide history by becoming one of the first two US states to adopt a law regulating cannabis (marijuana, sticky icky, the Buddha, trees, herb, whatever you want to call it) in a unprecedented passing of Amendment 64. Amendment 64 added clauses to the Colorado Constitution allowing citizens 21 years or older to possess, use and cultivate the psychoactive plant Cannabis sativa.
In my 3 months of exposure to the real estate industry and working as a REALTOR in Colorado, I have already had the opportunity to take two classes that give detail and explain how legal cannabis is effecting the Colorado real estate industry. These classes have mostly been focused on marijuana grow rooms and Colorado real estate. Below, I’d like to give you a brief synopsis of how legal cannabis can and is effecting home prices and the home buying and selling processes.
What does Amendment 64 say?
I am just going to cover the basics of the amendment here, but you can find a full version of the amendment by clicking here.
Amendment 64 allows Colorado residents age 21 and up:
To grow, cultivate, sell, and use cannabis on a personal level. Colorado residents are allowed to have 6 plants, with up to three at any time being in the flowering stage (Cannabis is a annual plant that dies after flowering).
- Tax revenue – the first $40 million in tax revenue from the sale of legal cannabis will be credited to public school construction funds. This tax rate may not exceed 15%.
- Localities may regulate whether marijuana sales establishments may be built.
- employers do not have to permit or accommodate cannabis usage by employees.
- A DUI law has been established for cannabis, which carries similar penalties as an alcohol related DUI.
- Cannabis may not be purchased or transferred to anyone under the age of 21.
- Cannabis can not be consumed openly in the public.
- Colorado residents are allowed to purchase up to one ounce legally, non residents may purchase 1/4 of an ounce.
- Provisions in the amendment allow for apartment complexes to deny marijuana users and growers leases.
- Marijuana is still prohibited in national parks, forests, Denver International Airport and several other places.
- This does not effect the already standing Colorado medical marijuana laws, which were passed in the early 2000’s.
Now, the crux of legal cannabis is how these marijuana grow rooms effect Colorado real estate.
The Power of 6
In the class the instructor harped on what he called the “power of 6 rule” which is supposed to refer to the amount of cannabis plants a citizen of Colorado may grow. Technically speaking, someone is allowed to grow 6 plants at once, 3 of which may be flowering. However, what happens when there are two or more residents? Tenants? Boarders? Phil, the guy who hasn’t gotten off your couch since January?
(6xR) +(6×0) + (6xB)+(6xT)+(6xW) = ??
This makes it very difficult to know the exact amount of plants that might be growing in a room in a Colorado home. There’s currently no registry for homes that are producing marijuana, so there is no real way to tell if the law is being followed in most cases.
What does all this mean in regard to Colorado Real Estate?
As a REALTOR:
- duties to client remain the same
- as an agent you must disclose any potential adverse material fact
- you have a right to refuse to take the listing
- you may choose to a specialist in this area
- marijuana user is not protected class under the fair housing act
- There may be physical impacts on thee house which may include inspection issues
- some physical impacts may have legal consequences
- marijuana use is limited to the approved municipalities
- real estate impacts are largely limited to the physical impacts of the pot growing operation
- there are no title, appraisal, insurance, or loan impact reported at this time.
- Did you ask about the locked room? Why is it locked??
- who does this crop belong to?
- if sellers are honest, don’t call the police
- included or excluded in contract?
- I doubt new owner will be happy with seller cleaning the area
- Fiduciary Duties
- duties remain the same
- can choose to be a specialist
- marijuana is not a protected class
- understanding legal effects
- Did you read MLS to see if there’s a grow?
- Did you ask buyer if they are allergic?
- where do you put information? NOT PUBLIC – only broker to broker
- seller’s property
- mold disclosures
- What does sellers property say about grows ,reworking of vents/ HVAC
- Mold disclosure takes on new meaning – national jewish marijuana grow information shows that there are possible health consequences from having a grow room in your home.
- Does inspector have training/ experience for marijuana grows?
- Often times the modifications are made by the grower and not a licensed contractor.
- additional outlets, bypassing breakers, plumbing taps, disconnected HVAC lines, sump pit drains, etc
- Electric inspection, Hvac inspection, Plumbing can all be potentially effected.
- What need to be repaired?
- how soon does marijuana grow need to be moved for proper cleaning
- when will 2nd inspection take place to verify the condition and repairs
- Final walk-through
- Expensive repair items
- cleaning process may take days to weeks
- allow plenty f time if using an air test and lab to complete their tests
- hazmat items removed
- check attic, crawl space, under basement subfloor, outbuildings.
We can expect to see the number of grow rooms rise in Colorado as legal cannabis reaches into its third year. Marijuana tourism to Colorado has increased exponentially, and it’s only safe to assume many will want to re-locate to Colorado in hopes of experiencing their own “homegrown” cannabis.
Some Extra notes from my class:
- What’s a grow house?
- small operation for growing marijuana
- small vs large operation
- hydroponic systems
- Large operation
- usually organized crime
- MO1 – home rented to unknowing landlord, entire house changed, very invasive
- MO2 – home purchases with cash.
- 200 plants – 2-300,000 per year
- Effects on the home
- lighting and ventilation
- ad hock mods of electrical system
- doesnt want meter to suddenly show high energy usage
- $10,000 – 12,000 $$ to power per year
- stealing electricity
- tampering with meter
- tapping electricity from upstream of the meter
- companies tipped off if electricity use is too ‘low’
- tap into service cables
- Effect on Home
- causes very little damage to home
- if none of the home wiring has been used.
- replace underground service cable and meter as needed and you’re good to go.
- tampering may not be so ‘clean’ – a less savvy operator may cause significant damage to existing electrical system
- oversize breakers
- oversized main breaker
- Danger of fire
- what’s the risk?
- investment properties pose high rise
- structural damage
- not as likely
- strange duct work.
- high humidity can cause condensation in walls
- causes mold problem
- Rot inside the walls
- ducts run into the attic
- common place mold is present in grow houses.
- Is mold a concern?
- medias representation of mold is unfounded
- remove source of moisture
- may require extensive clean up
- COPD, lung allergies
- Vapor barrier
- intended to keep humidity in the house, not in the wall structure
- good barrier goes a long way in protecting the wall cavity from high humidity environments
- recognizing a grow house
- windows blacked out
- people coming and going at odd hours
- Police surveillance
- heat monitoring
- hot exhaust gasses
- infra-red cameras
- Fly By in airplane to find suspect
- monitoring the home for strange activity
- snow melting on roof
- poorly insulated roof
- bathroom vent discharging in attic
- recessed light fixtures improperly installed
- Signs it’s a grow house
- police bust – forced front door
- concrete floor painted white
- screw holes
- unusual mods to plumbing
- holes in subfloor / ceiling
- unusual corrosion
- Inspection and remediation
- does it really damage the house?
- amateur operations = possibe
- excessive tapping into electrical panal – large knockouts
- discoloration/ rot / mold
- can’t recognize something buried in the ground
- structural damage may have been finished over.