Canada: A Primer On Cannabis Legalization And Real Estate Issues In British Columbia And Alberta

Last Updated: August 29 2018
Article by Peter Tolensky

Bill C-45, the Cannabis Act has received Royal Assent and is scheduled to come into force on October 17, 2018. Canadians will then be able to legally possess, consume and grow recreational cannabis. Bill C-45 enables provinces to establish additional regulations, some of which affect real estate. Here, we highlight the basics of Bill C-45 as well as the approaches British Columbia and Alberta are taking that impact various real estate matters.

1. What Does Bill C-45 Legalize?

Bill C-45 amends legislation such as the Criminal Code and the Controlled Drugs and Substances Act so that once-applicable provisions in these statutes no longer apply to recreational cannabis. Instead, Bill C-45 determines what cannabis-related activities are permitted and prohibited. The Bill permits (i) public possession of up to 30 grams of dried cannabis (or the equivalent in non-dried form); (ii) consumption in locations authorized by local jurisdictions; and (iii) cultivation of up to 4 cannabis plants per residence. It allows provinces and territories to set up their own retail and distribution schemes and set additional requirements for the possession, use and cultivation of recreational cannabis.

2. Provincial Legislation

British Columbia and Alberta have passed legislation in anticipation of Bill C-45 coming into force on October 17. In British Columbia, Bill 30, the Cannabis Control and Licensing Act (CCLA), governs possession, use and cultivation of recreational cannabis. The CCLA permits individuals aged 19 or older to purchase and consume cannabis, possess up to 30 grams in public, and grow up to 4 plants at home provided the plants are not visible from public spaces and are not cultivated in homes used as day-cares. The CCLA provides guidance for landlords and strata councils on their rights and obligations. British Columbia has also passed Bill 31, the Cannabis Distribution Act (CDA), which guides entities looking to establish a physical retail cannabis presence and presides over the distribution of recreational cannabis.

Unlike British Columbia, Alberta consolidates all provisions pertaining to possession, use, cultivation and retail distribution of cannabis under one Act: Bill 26, An Act to Control and Regulate Cannabis. Bill 26 amends the province's Gaming and Liquor Act and allows individuals aged 18 or older to purchase and consume cannabis as well as grow up to 4 plants at home. Public possession is limited to 30 grams and local governments may restrict permissible smoking locations. Bill 26 also guides landlords, condo boards and those looking to establish a physical retail presence in Alberta on their rights and obligations.

3. Residential Tenancies

The provincial governments of British Columbia and Alberta have taken different approaches when it comes to growing and using cannabis in residential tenancy situations. Alberta has so far not legislated against cannabis use or cultivation in residential tenancies. However, the government of Alberta has published information stating that individuals may be restricted from growing or smoking cannabis in their homes based on rules established by residential tenancy agreements.

In British Columba, the CCLA amends the province's Residential Tenancy Act such that if a residential tenancy agreement entered into before October 17 (i) includes a term that prohibits or limits smoking tobacco; and (ii) does not include a term that expressly permits smoking cannabis, then the agreement will be deemed to include a term that prohibits or limits smoking cannabis in the same manner smoking tobacco is prohibited or limited. Further, residential tenancy agreements entered into before October 17 are deemed to prohibit growing cannabis plants, unless (i) the tenant is growing federally authorized medical cannabis; or (ii) growing these plants is not contrary to the terms of the tenancy agreement. Residential tenancy agreements entered into on or after October 17 must expressly state whether there are any prohibitions or limitations on growing or smoking cannabis. In the absence of any such prohibitions or limitations, landlords and tenants are free to negotiate terms regarding growing and smoking cannabis.

4. Strata/Condo Bylaws

In British Columbia, the CCLA does not make amendments to the Strata Property Act nor has the provincial government imposed any specific cannabis related restrictions on strata councils. Similarly, Alberta has not imposed restrictions on condo boards' ability to enact bylaws and rules restricting the use or cultivation of cannabis. This implies that strata councils and condo boards in each province are free to enact bylaws and rules that restrict smoking or growing cannabis, although as noted below, this may raise some issues with respect to cannabis used for medical purposes.

5. Residential Insurance

Home insurers may have clauses in their policies stating that they will not insure homes used for the production of cannabis. In a recent court decision in Saskatchewan, a judge held that such a clause disentitled a landlord from an insurance payout for damages caused by their residential tenant's cannabis grow-op, even though the landlord had not been aware of the existence of the grow-up at the time, and had not given the tenant permission. While this case was decided in Saskatchewan, similar clauses may be found in insurance policies across Canada.

6. Medical Cannabis Restrictions in Leases or Bylaws

Medical cannabis is currently governed by the Access to Cannabis for Medical Purposes Regulations (ACMPR). On October 17, this legislation will be repealed, and the Cannabis Regulations, which accompany Bill C-45, will govern medical cannabis.

If a landlord, strata council or condo board attempt to restrict an individual's use of medical cannabis they may be violating Human Rights Codes or Canada's Charter of Rights and Freedoms. However, there may be existing obligations to other tenants, including provision for the quiet use and enjoyment of their leased property, and the use of medical cannabis may pose a nuisance to these others. These obligations and the rights of an individual using (or growing) medical cannabis may be irreconcilable. Recent authority suggests that in some situations a no-smoking provision in a lease or bylaw may continue to apply if medical cannabis can be ingested in other ways.

7. Distribution and Licensing

The government of Alberta has decided to allow only privately operated retail cannabis stores while the provincial government will operate online sales. The Alberta Gaming and Liquor Commission (AGLC) will oversee both types of operations.

In British Columbia both public and private retail stores will be permitted. Similar to Alberta, the government of British Columbia will solely operate online sales through the province's Liquor Distribution Branch (LDB). British Columbia's Liquor Control and Licensing Branch has been renamed the Liquor and Cannabis Regulation Branch (LCRB) and will licence and monitor compliance of public and private recreational cannabis stores.

In both provinces, only licensed stores may sell cannabis, cannabis seeds and cannabis plants. However, supplies used for cultivating cannabis may be sold at other retailers like gardening stores.

(a) Licensing in British Columbia

Before submitting an application to the LCRB for a retail cannabis store licence, prospective applicants must first register their business with the Province and declare that they own or lease, or have an agreement to own or lease the proposed retail location for at least 12 months from the time a licence is issued. To be clear, applicants are not required to commit to a purchase or lease at the time their application is submitted, but they must complete said purchase or lease after receiving conditional approval.

Currently, a licensee is only permitted to hold or have an interest in a maximum of eight cannabis retail store licences, and a franchisor may not have more than 8 franchises. These limits will be reviewed on January 1, 2021.

British Columbia allows local governments to decide if and where recreational cannabis can be sold, and whether it will be sold in public or private stores or a mixture of both. Further, local governments are responsible for providing business permits as well as regulating land use and zoning. Therefore, applicants must first obtain the support of the local government where the proposed retail space is located, who will then notify the LCRB that it approves the application. In British Columbia, alcohol and cannabis will not be allowed to be sold in the same store.

(b) Licensing in Alberta

In Alberta, the AGLC will oversee licensing for private cannabis retailers. Alberta's approach is similar to British Columbia's in that municipalities are responsible for issuing permits, land use and zoning laws. Upon municipal approval, the AGLC requires background checks for key individuals and employees at a proposed location, a secure storage area on the premises and surveillance systems. Currently, licenses will be limited in that a cannabis retail store must be operated separately from other businesses of the license holder, and must only operate for the purpose of retail cannabis sales, along with cannabis accessories. For more information on retail cannabis licensing in Alberta, see Devin Itterman and Shaun Partridge's article, The New Gold Rush: Licensing Issues for Retail Cannabis Sales in Alberta.

8. Outdoor Growing in British Columbia and Alberta

The Cannabis Regulations allow commercial producers to grow cannabis outdoors. Provinces can prohibit this practice, but currently, British Columbia and Alberta have not legislated against it.

British Columbia's provisions permit personal outdoor gardens. However, like indoor growing, these gardens are restricted to 4 plants, cannot be visible from public locations and cannot be grown in homes used as day-cares. Alberta permits growth of up to 4 indoor or outdoor plants, but with no restriction on visibility.

With thanks to articling student Noor Mann for his assistance in drafting this post.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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