Successful real estate investors
understand having a solid long-term business strategy is key. Part of
that strategy is staying up-to-date on changes in state, local, and
federal law, and how they may impact rental activities. The situation is
becoming more complex as we see an increase in states enacting new laws
legalizing marijuana for both medicinal and recreational purposes. In
areas where marijuana hasn’t become legalized yet, experts agree the
best investment strategy for property owners is drafting a plan for a
future where marijuana is legal nationwide.
Anticipating Change
A quick survey regarding laws governing
the use of marijuana shows an acceleration of new legislation in recent
years. Ten years ago, there were 13 states with laws allowing medical
marijuana and zero allowing recreational use. At the end of 2018, 33
states and Canada have legalized medical marijuana, and 10 of these
states allow recreational use. As pressure to legalize marijuana
continues to grow, more states are likely to follow. It is entirely
possible that major federal marijuana reforms will not be too far
behind.
Potential Impact
As the legalization of marijuana
potentially becomes more widespread, it’s important to consider the
impact that resident use can have on a property. Banning activities like
smoking and vaping in rental homes is widely accepted. If the rental
agreement clearly states prohibitions, the law generally sides with an
owner. Tobacco smoke and vapor cause substantial damage to a rental
property. It leaves residue resulting in stains and unpleasant odors.
Despite the widespread misconception that vaping is harmless, vapor can
create a sticky film on all surfaces. This film is as difficult to
remove as smoke residue and can cause serious damage to interior
elements.
Medical Use Accommodations
Marijuana is no different in terms of the
potential damage to rental properties. Walls, ceilings, blinds and
carpeting will quickly show damage from exposure to marijuana smoke or
vapor, creating expensive repairs beyond normal wear and tear. For this
reason, bans on smoking should include marijuana as well. However, under
the Fair Housing Act, a resident with a medical condition can request
accommodations to have medical marijuana on the property. Denying a
request could result in a lawsuit, placing property owners in a bit of a
bind with conflicting federal laws.
As of now, federal laws prohibit
marijuana usage, both medical or recreational. In states where marijuana
has been legalized, the presence of marijuana on a property increases
the risk of criminal arrests and asset seizure. Some insurance companies
won’t write policies on rental homes where marijuana is permitted or
charge additional premiums. Either situation increases your financial
exposure and erodes profitability of any rental property. Property
owners will only benefit from having a plan in place for dealing with
situations when the time comes.
Planning Ahead
Property owners can prepare for legalized
marijuana in several ways. Understanding the laws in your area is an
important step. Each state has unique statutes about medical and
recreational marijuana, as do some local municipalities. You should
anticipate resident inquiries about marijuana use and include language
in lease documents that clearly state your policy. As marijuana use
becomes more common, deciding how to handle it in advance can better
balance liability with resident satisfaction.
Property owners can better
mediate the risks that changing laws may bring by having a plan.
This is where a national property
management company like Real Property Management becomes an invaluable
resource. As industry experts, they help property owners prepare for
future changes in the law while also protecting the value of each
investment.
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