What You Need To Know About Marijuana Laws and Real Estate

Marijuana is an illegal drug, right? Yes and no. At the Federal level, marijuana is 100% illegal for any use whatsoever. However, many states allow the use of marijuana for medicinal purposes, and some have even gone as far as allowing it for recreational use as well.

This leaves us with a LOT of uncertainty. If a state allows the use of marijuana at some level, can you still be arrested by the Feds? Where is it grown? Does marijuana-related income count for a loan? Is it risky to rent to a medical marijuana distributor? Are you breaking fair housing laws by refusing to allow your tenants to grow marijuana?

Regardless of how you feel about marijuana, it is important to stay on top of the new laws because they will, and already are, affecting real estate on every level.

 

BANKS VS. MARIJUANA

Banks and other government agencies like Freddie Mac and Fannie Mae are federally regulated and thus do not accept marijuana-related income on loans in their programs. In fact, many banks that report to federal regulators cannot even accept deposits from marijuana-related income. A recent American Banker article reported that there are 301 banks that provide banking services to marijuana-related income and businesses, but they need to understand the risks involved.

 

LANDLORDS VS. MARIJUANA

If you own a rental property, you really need to understand how marijuana laws relate to real estate because this gets sticky (pun intended) very quickly. Here are a few items to consider:

  • Will you rent to someone whose income comes from marijuana-related business?
  • The Institute of Real Estate Management (IREM) released a statement warning property owners of the problems caused by marijuana cultivation on site. "The growing of marijuana requires significant amounts of water, heat and humidity. These conditions can create mold issues in properties. These requirements can also increase utility costs for the landlord if the tenants don't pay individual electric and water wills. Further, the property could be subject to civil asset forfeiture if you permit growing."
  • Under California Prop 215, landlords are not required to rent their property for a use which includes growing, cultivating or distributing medical marijuana. You should check the regulations in your local state about how they handle landlord laws.
  • California considers it a fair housing violation to refuse tenants allowance to smoke medical marijuana on their property. If you live in a state that allows medical marijuana use, you should check the regulations about how they handle this.
 

HOW COLORADO IS HANDLING NEW MARIJUANA LAWS

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In an attempt to put people's minds at ease about a potential weed dispensary opening up next door after Colorado voted to allow recreational marijuana use, the Colorado Association of Realtors released a statement.

"Although state law allows pot shops to exist, amendment 64 gives local governments the authority to regulate commercial activities associated with the recreational use of marijuana. The majority of counties in Colorado have either already passed bans on recreational marijuana retailers or have delayed making a decision and placed a moratorium on pot business."

 

WHAT YOU NEED TO KNOW

Regardless of what you think about marijuana use, you have to understand that these new laws will affect you and your clients. Stay up to date on the regulations and keep your clients informed!

-Dusty

 

*This article is strictly informational and is in no way supporting or opposing marijuana use. The data is from Rob Chrisman's "Leadership Report (2016 Vantage Production, LLC)