Marijuana man losing mortgage a good lesson for clients, say brokers

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A licensed medical marijuana grower who had his mortgage pulled by Scotiabank is a good lesson for clients who do unauthorized renovations, say brokers.
 
“Marijuana or no marijuana – it sounds as though the unauthorized renovation work itself warranted a breach of the mortgage,” says Calum Ross, owner of the Mortgage Management Group. “For someone to make renovations to accommodate a marijuana grow operation (legal or otherwise) without getting prior written consent takes such staggeringly bad judgement that I would suggest he may be sampling too much of his own product. I applaud Scotiabank on the decision.”
 
Robert McIlvenna, a retired school teacher living in Sudbury, Ont., was told by a federal court judge that the Canadian Human Rights Commission did not err in dismissing his discrimination claim against Scotia for calling in his mortgage – that  despite his status as a licensed medical marijuana grower.
 
In the complaint, McIlvenna alleged that the only reason for the demand was “because the bank has learned that there is cannabis growing on the property.”
 
The growing was being conducted because his son’s disabilities required the drug’s use, he told the commission and court.
 
But for Ross, the terms of the mortgage were clearly spelled out for McIlvenna.
 
“The paper clearly states, ‘those changes were substantial and were made without the consent of Scotiabank and had the effect of considerably reducing the value of the property ,’” Ross told MortgageBrokerNews.ca. “People need to use more common sense in their mortgage dealings. If you have any concern about the legal ability of potential recourse of something you are doing with a home you have a mortgage on, then do yourself a favour and get a written authorization in advance from the lender.”
 
Scotiabank took the position that it was exercising its contractual right to call the mortgage because McIlvenna had violated its terms. To accommodate the cannabis, McIlvenna had made extensive renovations to the home, which was 40 per cent complete at the time the bank re-appraised the property.
 
Under the terms of the mortgage McIlvenna was required to keep the property in good condition, inform the bank of planned improvement, provide a plan and not deviate from the plan. Scotiabank alleged that McIlvenna had breached these conditions and had reduced the value of the house by $47,000.
 
Ron Butler, owner of Verico Butler Mortgage, agrees that the homeowner should have followed the terms of the mortgage agreement – notwithstanding the morality or legality of his obligation to his son.
 
“While I am a strong proponent of the total legalization of cannabis, Scotia’s position is fair in all ways that I know of,” says Butler. “The fact there was a person in the home who had a need for marijuana is a non-issue; there is huge access to grass in this country so there were many other solutions other than building a mini grow-op in the house.”
 
In his ruling, Justice Roger Hughes ruled that the dismissal by the human rights commission was reasonable, citing Scotia’s decision to pull the mortgage was valid as “those changes (made by McIlvenna) were substantial and were made without the consent of Scotiabank and had the effect of considerably reducing the value of the property.”
 
And the stigma attached to property value and marijuana grow operations should have been known by McIlvenna, says Butler.
 
“Marijuana growers large and small actually do understand the real estate stigma attached to what they are doing to their properties,” says Butler. “Legal grower or illegal grower, the negative real estate impact of even a small grow-op is massively repeated through all media, all the time. This action drastically affected the value of the property and that is the whole story. Scotia is within their moral and contractual rights. The guy knew what he was doing.”
 
  • Jeff Reisner on 2013-06-27 10:22:27 AM

    Stupid move by the client and a smart one by the bank...Obviously the client had no consideration for the loss in value and increase in risk for the Bank...why should the bank care about the "reasons" the client was growing pot...like Ron said...access to pot is easy...ruining "someone else's" property to grow it is just ignorant!

  • Najeeb Sumrani on 2013-06-27 12:03:03 PM

    yeap, I agree.

  • Anthony on 2013-06-27 1:03:52 PM

    So the federal govenment gives this guy a license to grow...presumably in his own home...and the bank has the balls to call his mortgage...?

    what do any of you know about the modifications or alterations to the property without being there to see them...Scotia wanted out because of the grow...period...

    Calum and Ron and whomever else agrees to this are kow-towing so low to to Scotia that I can hear their foreheads hitting the ground...

  • Russ From Cameron Mortgages on 2013-06-27 3:12:19 PM

    Folks there is more to this story, a bank or mortgage company don't just go out and look for problems there was other facts effecting the lenders decision to foreclose

  • Broker Lee on 2013-06-27 3:18:55 PM

    The ultimate owner of a house is the city, then the bank when there is a mortgage, then the owner.

  • Crotchety on 2013-06-30 2:27:45 PM

    Most people do at least minor renos to their homes, some tell the city and get permits, nobody informs their bank. This is absolutely biased.

  • John Korbilas on 2013-07-03 8:30:32 AM

    classic! the right decision.

  • Jim on 2013-07-03 11:01:47 AM

    Pot does grow outdoors very well, there is no need to produce excessive humidity in your home (great way to produce mold) by growing any plants, whether it is veggies or pot. Having an indoor garden has major implications on the homes health and value. If Scotia found out a client had any kind of indoor garden that could potentially decrease the value of their security then YES foreclosure should occur. GROW IT OUTDOORS OR GROW IT IN YOUR WINDOW LIKE A HOUSE PLANT, VERY FOOLISH!

  • AKA on 2013-08-27 4:50:40 AM

    This is all about the "grow-op" stigma.
    One shouldn't confuse an indoor medical cannabis garden to an unscrupulous for-profit grower's clandestine operation.
    The former are concerned about the cleanliness of their meds and can only grow in their own home (or rented with landlord's permission) or property. Since they have to live in the house, it is done properly. In fact, done properly the med-grade grow room is the cleanest area of the house.

    The latter (for-profit grow-ops) set up shop anywhere and are ready to move out in hours notice, so they don't care what mess they leave. They only stay long enough to tend their grow-op to avoid getting caught so things go wrong. Last, it won't grow to any sort of maturity in a window and growing outdoors has its own risks and limits.

  • John Dearin on 2013-08-27 10:34:51 AM

    "To accommodate the cannabis, McIlvenna had made extensive renovations to the home"

    Extensive renovations here, not a bigger window sill and a furnace humidifier.

    FMV down $47,000. Good decision. I guess all of us have bumpy foreheads except AKA

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