Marijuana and Residential Real Estate on RE/MAX of Boulder Radio

Posted by on Friday, April 3rd, 2015 at 9:57am.

ROB (RE/MAX of Boulder) Radio’s host Duane Duggan interviews attorney Jon Goodman about a hot topic in Colorado real estate.

Listen to the full interview at: https://soundcloud.com/overthetopcycling/marijuana-and-residential-real-estate

Jon Goodman has been a real estate attorney since 1985 and has helped guide REALTORS® across a range of issues. Recently, he has been teaching classes to REALTORS® about marijuana and real estate. Jon became interested in this topic because during the recession in real estate a few years ago, he received several calls from commercial warehouse owners who had the dilemma of letting their property go into foreclosure or renting it to cannabis growers. Jon advised these owners on the pros and cons of this decision and helped them with risk management.

He addresses two key areas of marijuana and residential real estate: the landlord point of view and the resale market.

A fundamental point in the discussion is the political issue that marijuana is legal in Colorado but not legal at the federal level. Jon explains that the conventional wisdom is that federal law trumps state law, however, the federal government has limited prosecutorial and investigative resources, and is moving in the direction of keeping their hands off of marijuana operations. Nevertheless, the federal government reserves the right to change their minds.

In answer to Duane’s question, “Do we have to allow marijuana use on a rental property or can we prohibit it?,” Jon replies that it is clear that landlords can prohibit marijuana consumption on their property.  Many things are legal in Colorado, for example owning cats, but a landlord can prohibit a tenant from owning cats on their property. It gets more complicated because of the Americans with Disabilities Act, which requires that landlords make reasonable accommodations for tenants with disabilities. Some people claim that their disabilities can only be treated with marijuana, however, under federal law, the American with Disabilities Act does not require landlords to make reasonable accommodations for illegal behavior. As it is still illegal to use marijuana under federal law, a landlord is on solid grounds prohibiting it, even if a tenant has a medical marijuana card.  

If a landlord is renting to tenants and finds a grow operation on the property and wants to stop it, it would be Ideal for the landlord to have had marijuana-specific language in the lease. Nonetheless, even if the lease does not have specific prohibition language, boilerplate language in most leases provides that tenants must comply with all laws, including federal law. Since marijuana use is illegal under federal law, and federal law trumps state law, landlords will generally prevail in an eviction case if they have to go that far.

“Can landlords discriminate against marijuana users?” asks Duane. “Yes,” says Jon, “anti-discrimination laws do not prohibit all types of discrimination.” Landlords can, for instance, discriminate against cigarette smokers, dog owners, and people who cannot put up a $2,000 security deposit. Fair housing laws prohibit discrimination against a protected class, but marijuana users are not a protected class.

In terms of the resale market, if a seller is a regular marijuana user, Jon says that it is advisable for the seller and the broker to make a disclosure. From a risk management perspective, there is a high probability that the buyer will find out post-closing about marijuana use on the property, most likely from neighbors. This might upset some buyers. In addition, sometimes there are lingering effects of marijuana consumption on a property. If a seller smokes, they might grow, and if they grow, they might use artificial humidity. If not vented properly, humidity might raise mold risk. In addition, some buyers might be allergic or sensitive to marijuana. For sellers who do not want to hear from buyers again post-closing, it is best to disclose. 

In other words, according to Jon, “When in doubt, get it out.” On the Colorado Seller’s Property Disclosure form, there is a disclosure for cigarette smoke but not marijuana, so the seller can write it in as an added disclosure. If the seller has been renting the property and does not know whether or not there has been regular marijuana use on the property, the seller should state that on the disclosure form.

According to Jon, it is likely that other states will be looking to Colorado and Washington states as incubators of the marijuana legalization experiment. Other states can learn from what Colorado and Washington are doing to develop their own take on it. 
 

Disclaimer: This is general information, not advice in particular circumstance. These cases do involve criminal repercussions, however, so with much at stake, Jon encourages people to talk to their lawyers as circumstances come up case by case. 

To contact Jon Goodman at Frascona, Joiner, Goodman, and Greenstein, P.C. email jon@frascona.com

 

 

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