The Medical Marijuana Business and It’s Effects on Landlords and Tenants

04/20/2015

Under California law, medical marijuana patients and primary caregivers may associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes.  As the Medicinal Marijuana business booms a level of confusion is bound to erupt between dispensaries and growers (as a collective or cooperative group of members) and the local or federal law enforcement.

Under laws that began to appear on the books in the 1980s federal officials can seize property they claim is involved in the marijuana trade. And until this December, those accused, even if they were legal marijuana businesses sanctioned under state law, had little to no defense at trial for any reason. Supreme Court case precedent established over this period of time also found that even those who used a “medical defense” in distributing the drug were still guilty and subject to federal prosecution.

The key tools in the Federal official’s war on marijuana are the “forfeiture laws” granting officials an opportunity to seize assets used in the marijuana business.  For landlords this means that officials may be able to even seize your building that you are renting to dispensaries or cultivation businesses in the marijuana business.  For tenants that use, sell, or grow marijuana this means that a landlord may more than likely evict you from the premises once the landlord is approached by government officials.

Under the idea that the property is itself guilty by association, police may take your property without convicting or arresting you, putting the burden on you to prove that property was not associated with any act against the law. The property seized does not have to belong to the marijuana growers or distributors to be seized. This can occur because civil forfeiture is a lawsuit against property, not the person, so legal action has less to do with a person’s guilt, and more to do with property’s use as an instrumentality in violating certain laws. If the property has been used in association with or to aid certain acts in violation of the law, the property is subject to civil forfeiture proceedings.

Unfortunately, almost any kind of property can be seized by the police under this property. The most common types of property seized are vehicles, cell phones, jewelry and cash.

In most cases, the property is sold and the funds generated from the sales are kept by the police department and/or the district attorney’s office.

First though, a brief overview of how asset forfeiture works. Forfeiture can be either civil or criminal. Forfeiture of real property used to violate the Federal Controlled Substances Act is governed by 21 U.S.C §§ 881 and 18 U.S.C  §§ 983 and 985. Pursuant to 18 U.S.C §881(a)(7):

“[t]he following shall be subject to forfeiture to the United States and no property right shall exist in them … [a]ll real property, including any right, title, and interest (including any leasehold interest) in the whole of any lot or tract of land and any appurtenances or improvements, which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this sub-chapter punishable by more than one year’s imprisonment.”

Since cultivating, manufacturing, and distributing marijuana are Federal crimes, real property used to facilitate the commission of those crimes is subject to asset forfeiture.

However, there is still a defense and safety net for the landlords.  Because 18 U.S.C §983(d) creates what is known as the “innocent owner defense” to asset forfeiture of real property. An innocent owner defense is a concept in the United States laws providing for an affirmative defense that applies when an owner claims that they are innocent of a crime and therefore their property should not be forfeited. It is defined in section 983(d) of title 18 of the United States Code (18 U.S.C. § 983(d)) and is part of the Code that defines forfeiture laws and more specifically the general rules for civil forfeiture proceedings. It states:

“An innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute. The claimant shall have the burden of proving that the claimant is an innocent owner by a preponderance of the evidence.”

The term “innocent owner” means an owner who (i) did not know of the conduct giving rise to forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.

California Medicinal Marijuana laws do not directly address the rights of Landlords or Tenants, and this area has been left open to be determined in the courts.

Commercial Application:

Letters given to landlords of medical marijuana dispensaries by the Drug Enforcement Agency (DEA) generally inform landlords that the sale of medicinal marijuana is illegal under federal law. The DEA assert their right to confiscate the landlord’s property, in accordance with the law of civil forfeiture.  However, as of January 16, 2015 the Office of Attorney General in Washington D.C. explains that the federal adoption of property seized by state or local law enforcement under state law is prohibited. The prohibition on federal adoption includes, but is not limited to, seizures by stale or local law enforcement of vehicles, valuables, and cash, which is defined as currency and currency equivalents, such as postal money orders, personal and cashier’s checks, stored value cards, certificates of deposit, travelers checks, and U.S. savings bonds.

In business agreements between “merchants,” the law assumes that both parties are sophisticated, such that they should know about the contracts they sign. So, if no provision is included in the lease about illegal activity, the landlord may not have an obvious reason for eviction.

On the other hand, a California court may be hesitant to undermine the authority of state law allowing medical marijuana dispensaries. Despite the DEA’s letters, to date no landlord that my office is aware of that is keeping a “low profile” has had his property forfeited. The court may consider whether the DEA has the resources to do so. The DEA has only charged people with direct involvement in the cultivation and sale of marijuana, and those who made large profits.

At first glance the best defense a landlord may have is to a DEA civil forfeiture is to evict the offending commercial tenant. In many states and cities though, the landlord must have a “just cause” in order to evict a tenant. Breach of contract is typically the reason given if the landlord is afraid of DEA action, but breach of the lease is dependent on the specific language of the lease.

Residential Application:

As reiterated above, under federal law, patients have no rights and all marijuana is illegal. Fortunately, federal law enforcement has little interest in the individual patient-cultivator tenants, and the owners of their residences face little risk of asset forfeiture.

Since possession and cultivation of medical marijuana are legal to some extent under state law, some landlords may not be able to discriminate from renting to patients.  Technically a landlord should not discriminate against renters because of any legitimate medical conditions.  In other words a landlord should not be able to discriminate against medical marijuana patients that are renters.

If you get evicted solely because of your patient status or possession of a legal amount of medicine, you may be able to file a lawsuit against your landlord.

Hire a lawyer. Because of the unique legal situation medical marijuana landlord and tenants face, it’s important to seek professional legal advice. A lawyer will also be able to help guide you through these complex set of conflicting state and federal laws and better educate you for the development of your landlord/tenant strategy.

Our Lawyers are familiar with Medicinal Marijuana Nonprofits and those laws facing the Medicinal Marijuana industry. Many business owners, tenants, and landlords have no idea the amount of power they have, when they are being advised by a legal representative in these cases. A lawyer will look at the complete situation, and then advise you on the different circumstances that are suitable for your situation.

For a free consultation regarding any issue that you might have with the Medicinal Marijuana business, call Legal Solutions 2 U today at 855 – 77 LAW 2 U (855-775-2928)

 

[THIS PART 4 OF A 4 PART ARTICLE]

 

 


Discuss your specific needs with a qualified attorney.  The information herein is not intended to be legal advice or a complete list of laws or rules related to landlord or tenant rights.