Landlords and property managers are seeking to better understand the issues of legal marijuana when it comes to tenants in their states.

By John Triplett

ARPOLA

Laws are changing all the time. Voters may approve different levels of permission in different states when it comes to marijuana. This leaves landlords and property managers trying to figure out what should be in their leases around the issue.

You may be able to ban smoking, but do you really know what your tenants are eating or growing in their apartments? Do you really want to know if they are good paying tenants?

ARPOLA recentlyl did an interview with Seattle, Washington attorney Bret Sachter, an expert in tracking the progression and transformation of marijuana laws, to discuss some common questions property managers have about marijuana and tenants.

“I’ve been asked this a lot,” Sachter said, “but it does not come up as often as you might think.

“The overarching issue here is that, with few exceptions, people can do what they want to protect their property, even if the prohibited behavior is not illegal. You can prohibit smoking, prohibit pets, but with marijuana it’s much easier because it is federally illegal. So you can pretty much prohibit it if you want to no matter what, even medical marijuana,” Sachter said.

In terms of Fair Housing issues, and the U.S. Department of Housing and Urban Development (HUD) it is a situation where HUD wants it in the lease that marijuana is illegal but enforcement is another issue. It is not so much that HUD wants landlords to evict over marijuana, but that you have something in the lease language that allows for eviction in the instance of marijuana use on the property. “So it is pretty clear as far as HUD is concerned,” he said.

Question: If a tenant comes in and says I have a disability, here is a note from my doctor, I use medical marijuana, which is legal in this state, and I want to rent your apartment. Can a landlord prohibit that?

Answer: “A landlord can absolutely prohibit that because marijuana is illegal under federal law.” The landlord can say, “I understand our state allows medical marijuana but as it is still a Schedule 1 drug and I prohibit it on my premises.”

Question: What if a tenant says marijuana is legal and they should be allowed to use it?

Answer: “If your lease prohibits smoking and prohibits use of illegal drugs, then the legality of marijuana at the state level is irrelevant because under federal law marijuana is illegal. If your lease does not have those types of clauses, you should talk to an attorney in your state or city to find the best solution for your lease.”

Question: If a landlord says no marijuana in the lease, and then finds plants growing in the rental, can the landlord can evict?

Answer: “It is always my advice to make it crystal clear in leases. You cannot have it both ways. You cannot say, ‘Hey we are marijuana friendly” and use it in your marketing to lease to tenants, and then evict over a marijuana issue.”

There is no law about reasonable accommodation for marijuana users, federal laws do not require it. As far as the federal government is concerned it is not ok.

“One thing I would say, and it is important, I would encourage landlords just to make everything clear,” in the leases, he said. “Clarify in a lease that you must abide by all laws state and federal.”

That is the case in residential. He said it can be different in commercial.

“But In residential it is not as tricky, and I am speaking very generally here,” Sachter said.

“The states may have their own thing going on with legal marijuana laws, but it is still federally illegal and you do not have a leg to stand on as a landowner and I am speaking in generalities here. Make it crystal clear in your leases is my best advice,” he said.

You cannot have it both ways as a landlord

“How can you attract tenants in a state where it is legal yet protect the owners of the property? You cannot have it both ways.”

“I know in Seattle there are Airbnb bed and breakfasts that specifically market themselves accordingly. They are part of marijuana tourism to come and stay in our place where it is legal.” But you have to have that up front in the lease  if a property manager doesn’t want that going on.

“If your tenant is Airbnbing to a tenant who is then using marijuana – well if you can’t catch them you cannot do anything about it. You have to prove they are doing this.  They are going to be using marijuana regardless of what the lease says.”

What if the tenant using marijuana is a well-paying, good tenant?

“Landlords can certainly put a no-waiver clause in the lease. If I say, ‘Here is a list of prohibited things’ and if you do these prohibited things in the lease, you are subject to eviction.”

“However, any time I waive any of these things does not constitute an overall waiver. It basically means you should not ever do it again,” he said. “Just because you get away with it once, does not mean you get away with it every time,” Sachter said.

Can I say ‘no pot in my rental?’

“Usually if you say, ‘No pot in my rental’ and you find a tenant using marijuana and you haul them into court, more than likely the judge is going to say, ‘Have you stopped?’ to the tenant and ‘Are you going to do it again?’ and the tenant is going to say ‘No.”  And then judge will say, ‘Ok, dismissed.”

To put a more legalistic term on it, usually a court will be in favor of “allowing the tenant to cure the defect,” rather than evict for most things like that, Sachter said.

What one experienced property manager says

Sam Driver, Product Director for Buildium.com, and an experienced property manager at the property management software company, said as far as marijuana use in rental housing, due to the newness of the legislation, the federal laws that supersede state and county laws, and liability concerns, it is not a topic that comes up a lot – yet.

“Generally, the safest solution is to choose the most conservative path. Impose a no-smoking policy, which can in some cased cover outside areas, and a crime provision that includes local, state and federal laws. In many states, there are setbacks from doors. It is particularly important if the building is a place of work. So your lease should contain a provision explicitly banning smoking and illegal activity. Because the feds still outlaw it, this should be sufficient,” Driver said.

“This of course only covers the smoking angle. If a resident consumes it in another way, you’d likely never know,” he said.

Growing marijuana could put a power load on your rental property

“As for growing, that’s less clear. But in general, unless the electrical system is designed for it, the loads grow lights put on the rental could be excessive. I’d consider a reasonable use clause that specifies all high load equipment, including lights, air conditioners and any kind of pump be approved by you.

“This would put you in a position to take action. If they are putting too much load, without specifically calling out the use of the equipment. Pumps are a good area for monitoring. They have an intermittent load, they trip breakers, and anyone who is using a hydroponic system would need several,” Driver said.

What if I want to market my rental to marijuana users?

“If, however, you wanted to roll the dice and market to this crowd, assuming your state laws allow it, remember that the federal laws would cover any bank deposits from proceeds.

“In this case, you’d be able to do it, assuming no federal intervention, in compliance with local laws. No insurer would provide EO&E (errors and omissions excepted) insurance to you, and you wouldn’t be able to deposit any funds into a federally-accredited bank. So you’d have to self-insure, and run an entirely cash business, but you could do it, risking only federal enforcement.

“The big question is, ‘Would the premium rents be worth the risk of forfeiture? If you run afoul of the federal drug laws, the asset seizure possibility is a huge risk. You could lose the building.

“If you’re managing other owners’ properties, then you’d be risking their assets even if you used different leases, unless you kept fully separate books, bank accounts, and co-mingled nothing. So I’d say it would be all-or-nothing.

“The timing is tricky, too. Leases contain a provision that stipulates that the contract is in force in a specific jurisdiction. If they change the laws rendering your lease out of compliance, what happens during the remaining time of the lease? Is it invalidated? Or does the contract remain in force until it expires?

“Good questions for your lawyer,” Driver said.

About Bret Sachter:

As a Presidential Scholarship recipient, Bret received his law degree from the Seattle University School of Law. In addition to his law degree, Bret holds a bachelor’s degree in evolutionary psychology and master’s degree in psychology. Bret has taken an interest in tracking the progression and transformation of marijuana laws, as they are among the most recent and highest-profile legal issues affecting entrepreneurs in Washington and, increasingly, all around the country. You can call him at 206-295-2547 or visit his website here.

Resources:

28 legal marijuana states and the district of columbia