June 19, 2013

Smokers Ruin Property Value

Smoking in the home may significantly affect property values, and allowing smoking in rental units is costly to landlords.
Pfizer Canada, a leading biopharmaceutical company, recently sponsored a survey of Realtors conducted by Leger Marketing, which concluded that 87 per cent of Ontario real estate agents and brokers surveyed said smoking in the home lowers resale value. Eighty-nine per cent said smoked-in homes are more difficult to sell.
Thirty-one per cent said smoking may lower a property’s value by 20 to 29 per cent, and 21 per cent said the value could drop 30 per cent or more. That’s $120,000 on a $400,000 home!
Fifty-six per cent said most buyers are less likely to buy a home where people have smoked and 27 per cent said most buyers are actually unwilling to buy a home where people have smoked.
The number one reason given was smell; number two was health (second- and third-hand smoke).
Rental landlords know about smoker smell. Unless the new renter of the unit is a smoker too, the new tenant invariably requires the unit to be “detoxified.” This may cost $450 to paint a one- or two-bedroom unit, $100 or more to steam vacuum the carpets and maybe $100 to wipe down and clean all other surfaces (windows, mirrors, balcony doors, closet doors, kitchen cabinets, appliances). You may need to replace or repair countertops, appliances and other surfaces that have been marred by cigarette burns. In a heavily smoked-in unit, you may need to use a stain killer primer or extra paint; replace carpets; clean vents, ducts and ceiling fans; and even clean electrical sockets, where tar and nicotine can accumulate. Promising to deliver a smoke-free unit that still aggravates the new tenant could lead to further costs and a rent abatement award from the Landlord and Tenant Board.
Now add in the possible loss of the insurance deduction for a smoke-free building.
Then there are the possible complaints of neighbours, or the loss of tenants with health concerns for themselves or their children.
The Council of Canadian Fire Marshals and Fire Commissioners report that smokers’ materials and open flame (cigarettes, lighters and matches) remain the No. 1 ignition source in fatal residential fires. Between 1993 and 2002 (most recent figures available) there were 9,414 fires, more than $231 million in losses, 688 injuries and 94 deaths caused by lit smokers’ materials.
Landlords and property managers may be concerned that rejecting smoker tenants would constitute discrimination and possibly increase their vacancy rate. The former is incorrect and statistics for the latter say otherwise.
Smokers are not one of the protected groups of the Human Rights Code and, according to the Non-Smokers’ Rights Association Smoking and Health Action Foundation, it is legal for a landlord anywhere in Canada to include an enforceable no-smoking policy in their lease.
Health Canada’s Annual Canadian Tobacco Use Monitoring Survey (2011) reported that 14 per cent of Canadians smoke daily, while four per cent smoke occasionally. Daily smokers consumed an average of 14.4 cigarettes per day.
Rental landlords, take note: a survey commissioned by the Ontario Tobacco-Free Network (conducted by Ipsos Reid) that researched drifting second-hand smoke in multi-unit dwellings (March 2007), reported that 64 per cent of Ontario respondents would prefer a smoke-free building if such a choice was offered. That means that, as a rental landlord, you can either:
a) rent to the minority 14 per cent market of smokers, try to attract some of the remaining 22 per cent who appear to be indifferent to smokers, and pay the additional smoker-specific cleaning costs when re-renting a unit, or;
b) rent to the 64 per cent of smoker-intolerant tenants; try to attract some of the same smoker-tolerant 22 per cent (total 86 per cent of the market) of tenants and save the average $650 additional smoker-specific cleaning costs.

Chris Seepe is a commercial real estate broker and broker of record at Aztech Realty in Toronto, specializing in income-generating and multi-residential investment properties, retail plazas, science and technology-related specialty uses (laboratories, data centres, call centres) and tenants mandates. (416) 525-1558; Email cseepe@aztechrealty.com: website www.aztechrealty.com.

No comments:

Post a Comment