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.
, 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.”