We moved in one of the first states to allow legal marijuana usage and growth but were certainly not the last. It seems that with every election more states are allowing the growth, distribution, and use of medical and recreational marijuana, but how does that play into a rental property? What should property owners and landlords consider even though this is a legal substance now?
There are things to consider before creating a policy on marijuana use in your rental property. You could be liable for things that you've never thought of before. Take these five things to consider:
Is there so mortgage on the property?
Most loan documents contain language that requires the borrower to comply at all times with state and federal laws. Because marijuana is still banned by the federal government, allowing any type of marijuana use or growing in a rental property could breach your loan documents.
Does insurance cover damage caused by illegal activities?
You'll want to review your policy closely and even ask your insurance company about the laws. We saw a spike in apartment fires after legalizing recreational marijuana and this could be caused by tenants trying to condense marijuana into a concentrated form using butane. This could be a very dangerous procedure and it's important to understand your insurance policy's rules.
What about damage from smoke?
Units or homes that are exposed to smoke for marijuana or any other type of cigarettes or cigars, can be a pain to clean as the smoke can be embedded in the walls, carpets, and other permeable materials. It can require quite an effort to remove the smell and smoke residue. This is probably not something you want to deal with but it needs to be included if you choose to write your property as a non-smoking unit.
What about other residents?
For multi-family units, smoke and smells are usually not contained to a single unit. This could be a nuisance or a detriment to other residents and could impact their health. Secondhand smoke even for marijuana can easily infiltrate nearby units and it only opens up property managers and landlords to complaints or even lawsuits.
Have you accepted public subsidies on your property?
If you have tax credits being used for building renovations residents who pay with section 8 vouchers, this typically requires full compliance with federal laws. Any marijuana use could be a violation of the rental property covenants. Could be considered civil or criminal fraud.
If you have more questions about this type of substance in your rental property feel free to contact me. I'd be happy to answer any questions you have to help you make an informed decision.