Forfeiture Threats in California Should Serve as a Reminder of the Risk to Landlords of Medical Marijuana Businesses
Yesterday, Reuters reported on California federal law enforcement authorities' latest effort to crack down on medical marijuana businesses. Though medical marijuana is legal under California state law, it remains illegal under federal law. In recent months, federal authorities have sent hundreds of letters to California property owners/landlords of properties housing medical marijuana businesses, demanding that marijuana activities at their properties be terminated. In absence of compliance with the demand, the letters threaten institution of civil forfeiture proceedings against the properties, and criminal charges against the owners/landlords.
Under federal law, real property used to commit or facilitate the commission of violation of federal drug laws is subject to forfeiture by the government. Apparently, given the legality of medical marijuana on the state level, many owners/landlords are not aware of their exposure under federal law. The article referenced above describes how using this threat (as well as the threat of criminal prosecution) has proven more effective and less costly than other avenues of enforcement. In many cases, the threat of forfeiture will spur the property owner/landlord to evict the medical marijuana business tenant, thereby accomplishing the authorities' goal of shutting down the operation. According to the article, targeting owners/landlords has led to the shutdown of hundreds of medical marijuana businesses.
Significantly for property owners/landlords, while eviction spares the owner/landlord of the risk of losing the property to forfeiture and also criminal prosecution, it also comes with its own costs for owners/landlords. These include significant legal expenses, and potential exposure to state law civil claims from the medical marijuana business tenants.
This approach seems to be a broad and coordinated effort among federal authorities in California. In contrast, while federal authorities in Colorado have also targeted property owners/landlords of medical marijuana businesses, their efforts have been much focused. Thus far, at least, only properties located near schools have come under federal scrutiny in Colorado, with the United States Attorney's office in Colorado sending out letters to groups of owners/landlords of such properties on multiple occasions. These letters also threatened seizure of property, and have been effective in causing the owners/landlords to ensure that the medical marijuana activities in their properties cease.
It is unclear whether federal enforcement efforts targeting landlords will spread in Colorado. Colorado has a much more extensive regulatory system for medical marijuana than does California, which many believe has contributed to the largely hands-off approach of federal authorities in Colorado. However, the apparently broad use of real property forfeiture proceedings in California, or at least threats of doing so, should serve as a reminder to property owners/landlords in Colorado that allowing their properties to be used for medical marijuana activities, even in full compliance with Colorado law, places them at risk of losing their properties in federal forfeiture proceedings. Criminal prosecution of owners/landlords is also a possibility.