Tuesday , 13 November 2018

What to do When Marijuana is Being Grown in the Home Being Appraised

This article was first published in the Landy Insurance blog.

As more states vote to legalize recreational marijuana, the number of people growing marijuana in their homes is sure to rise, which means appraisers are more and more likely to encounter marijuana plants in the course of an appraisal.  What, if anything, is an appraiser obligated to do in these circumstances?  There are many opinions on how to address the issue but given its relative novelty there is little guidance.

While the mere existence of a marijuana plant is unlikely to affect the appraisal of a property, the sometimes elaborate lighting and irrigation systems used to cultivate the plants might.  Sometimes “do it yourself systems” cause mold or water damage and/or have problematic wiring or ventilation systems which need to be addressed.  An appraiser who comes across these issues should identify the potential problem in the report, while still being mindful of the privacy concerns of the homeowner.  There are various ways to include such a notation, but a disclaimer that could be used is the following:  

“There appears to be a (sophisticated) system for growing plants in the (location) that involves (brief description).  The appraiser is not qualified to opine upon and will not opine upon the system or its impact, if any on the structure.” 

If there are obvious issue stemming from the system, such as mold, water damage, exposed wiring, over loaded plugs, poor ventilation, etc. this should be noted in the ordinary course.  The key, of course, is stay focused on issues that may affect the value of the property. 

A related challenge is that many lenders give appraisers specific instructions as to what to do if marijuana plants are encountered.  Lenders will sometimes request photos of any plants believed to be marijuana or request an opinion from the appraiser as to whether or not it is marijuana.  Appraisers should proceed with caution when in receipt of such directions.  The plants themselves – as opposed to the system utilized to grow the plants – are unlikely to impact value so is there a legitimate purpose for requiring photos?  Additionally, appraisers are not trained to identify plants and should avoid offering an opinion on whether or not a plant is marijuana.  Thus, if the lender gives explicit instructions it is important to know that before the appraisal and consider whether or not to accept the assignment.  Unless an alternative agreement is reached, once the assignment is accepted, the reasonable expectation is that the appraiser will follow the instructions given.    

This continues to be a new and evolving area and it will be interesting to see how it is addressed in the coming years. 

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About Jennifer Markowski

Jennifer Markowski
Jennifer L. Markowski is a partner at Peabody & Arnold LLP and is admitted to practice in Massachusetts and Rhode Island. Her civil litigation trial practice focuses on the defense of employment and professional liability claims as well as business litigation. She is an experienced trial attorney and zealous advocate for her clients. She can be reached at (617) 951-2010 or jmarkowski@peabodyarnold.com.

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