WHAT LANDLORDS NEED TO KNOW ABOUT THE LEGALIZATION OF MARIJUANA (AMENDMENT 64)

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1 WHAT LANDLORDS NEED TO KNOW ABOUT THE LEGALIZATION OF MARIJUANA (AMENDMENT 64) The election results are final. Colorado along with Washington State became the first two states to legalize the recreational use of marijuana. Although, while Amendment 64 has been widely publicized and will have some impact on the rental industry, the legal impact of Amendment 64 on landlord rights is minimal. However, landlords should review rental criteria, lease documents, and marijuana policies to ensure policies are clear. Landlords should also educate and train employees about the company marijuana policy to ensure effective implementation of those policies. Amendment 64 does not go into effect until the election results are certified by the Governor, which could be at any time. Amendment 64 has two major components. First, the legalization of the recreational use of marijuana. Second, the creation of a regulated marijuana industry in Colorado. Amendment 64 regulates marijuana like alcohol. For example, similar to alcohol, a person has to be over 21 to purchase marijuana, and driving under the influence of marijuana is illegal. Because the regulation of a marijuana industry has little effect on residential landlords in the short run, residential landlords are primarily affected by the use and possession component of Amendment 64. Amendment 64 also legalizes the growing of no more than six marijuana plants with three or fewer being mature. Persons who grow their own marijuana are also legally entitled to possess the marijuana produced by the plants on the premises where the plants where grown. However, all marijuana growing must take place in an enclosed, locked space, and cannot be conducted publicly. Individuals who grow their own marijuana may not make any grown marijuana available for public sale. Given Amendment 64, can a landlord still prohibit tenants from using marijuana on leased property? Yes. Regardless of Colorado law (Amendment 64), marijuana is still illegal under federal law. Specifically, marijuana is a banned Class I controlled substance under the Controlled Substances Act (CSA). Federal law supersedes Colorado law. The United States Department of Justice (DOJ), headed by the U.S. Attorney General, enforces federal criminal laws. U.S. Attorney General Eric Holder said back in 2009 that federal officials were committed to enforcing the CSA. The U.S.

2 Attorney for Colorado has prosecuted Coloradans for growing, selling, and possessing marijuana, even if they claimed protection under the state s medical marijuana laws. However, what the federal government says, and what it does, are two different things. Specifically, even though the federal government says the CSA will be enforced, the federal government has only prosecuted the most blatant marijuana offenders, and only those individuals growing or selling significant quantities of marijuana. The federal government has never enforced federal forfeiture laws against an apartment community because a tenant was smoking pot. It is not clear whether the Feds lack of enforcement is by choice. However, the reality is that the Feds simply lack the resources to enforce the CSA on a significant scale against individual tenants smoking pot. Thus, the probability of a landlord being prosecuted by the Feds for tenant pot use is slim to none. Amendment 64 specifically repeals the right of Colorado to confiscate a landlord s property through drug forfeiture laws. Similar to federal law, Amendment 64 recognizes the right of a landlord to restrict marijuana use on leased property. Amendment 64 specifically states that nothing shall prohibit any person who owns or controls a property from prohibiting or otherwise regulating the possession, consumption, use, or growing of marijuana on that property. Thus, a tenant s right to legally possess, use, and grow marijuana under Amendment 64 doesn t grant the tenant the right to possess, use, or grow marijuana on your property if you decide to prohibit it. Additionally, Amendment 64 doesn t give a landlord s employees or management company s employees the right to use marijuana if the employer decides to prohibit or restrict such use. Amendment 64 specifically states that nothing in the law is intended to require an employer to permit or accommodate the use of marijuana in the workplace or to affect the ability of employers to have policies restricting the use of marijuana by employees. Accordingly, landlords may still require drug testing as a condition of employment. Most landlords who currently prohibit the use of marijuana will not need to change any lease documents. Landlords primarily prohibit the use of marijuana through Crime and Drug Free Lease Addendums. These addendums typically define crime or drug related crime by referring to state or federal law. For example, drug related criminal activity means the manufacture, sale, distribution, use or possession of a controlled substance, as defined by law. If your crime and drug free addendum refers

3 to federal law, you do not need to make any changes. If your crime and drug free addendum refers to Colorado law, your addendum will need to be modified to refer to federal law. Because after the passage of Amendment 64, some forms of marijuana use and possession are no longer criminal acts under Colorado law. Under Colorado law, a landlord has the right to terminate a tenant s right to possession for non-monetary lease violations if the right to terminate is set forth in the lease. Despite the law, some judges are reluctant to kick a tenant out of their home for some non-monetary lease violations if the tenant has not been given an opportunity to cure. For example, many leases contain the right to terminate for unauthorized pets with no opportunity to cure. Over time, courts have become more and more reluctant to enforce pet violation termination clauses without giving the tenant an opportunity to get rid of the non-complying pet. Currently, marijuana use is a termination issue; meaning upon violation the tenant is not given an opportunity to cure. Given the conflict between federal and Colorado law, and if marijuana becomes more widely used and accepted in Colorado society because of Amendment 64, use of marijuana, even on a prohibited property, could become a compliance issue rather than a termination issue. We will keep our clients fully advised if we start to see a trend in the verdicts from marijuana related cases. As a practical matter, marijuana termination cases will become more difficult to prove. Currently, a strong marijuana termination case consists of a violation, and a police report or an arrest. Police officers carry significant clout in court to the point many tenants just move or don t show up. Because use is now legal, police won t be making any arrests, issuing any reports, or showing up to testify in the vast majority of cases. In most cases, the legalization of marijuana has also eliminated the leverage of landlords against tenants who were growing pot. Before Amendment 64, if a resident was growing pot, a manager could often get rid of a pot-growing tenant by simply threatening to call the police. We can do this the easy way, or the hard way. You can either move out, or I m going to call the police and tell them you have been growing pot. If you allow marijuana use, your lease documents should clearly state that use does not including growing marijuana. Allowing tenants to grow marijuana can result in significant problems including mold. If you are going to allow marijuana use, your lease documents should also make it clear that a tenant s marijuana use will not be

4 allowed to disturb other residents. For example, tenant s marijuana use shall not disturb the rights, comforts, and quiet enjoyment of other tenants. You should consider publishing the community s marijuana policies to prospective tenants as part of your rental criteria if the community does not allow marijuana use. Your policy could state that under Colorado law, some marijuana use is legal, however, under Colorado law landlords also have the right to prohibit the use of marijuana on leased property, and that the landlord has elected to prohibit marijuana use on the property, and that violation will result in eviction. By addressing the marijuana issue up front, applicants and tenants will be clear on your policies resulting in fewer tenant confrontations down the road. Amendment 64 did not change Colorado s medical marijuana laws. However, because recreational use is now legal, Amendment 64 will expand the universe of persons who will openly admit to using marijuana, and thus is likely to increase the number of tenants who claim to be using marijuana for disability related needs. Accordingly, you should anticipate a significant increase of marijuana related reasonable accommodation requests. Similar to medical marijuana related disability reasonable accommodation requests, your onsite teams should be informed about company policy, and properly trained on how to handle such requests. Landlords can adopt three policies regarding medical marijuana, and thus three policies regarding the recreational use of marijuana. One, prohibit the use of marijuana, even if the tenant makes a request for reasonable accommodations under fair housing laws, based on marijuana being a felony under the CSA. Two, deny recreational use of marijuana, based on the CSA, but engage in an ongoing dialogue and evaluation if anyone makes a disability request to use marijuana as a reasonable accommodation under fair housing laws. Three, allow the use of marijuana but prohibit marijuana growing. Landlords should adopt both a medical marijuana policy and a recreational marijuana policy. For example, you could prohibit the use of recreational marijuana (Policy 1), but allow the use of medical marijuana as a reasonable accommodation (Policy 2). A landlord s medical marijuana and recreational marijuana policies don t necessarily need to match, but matching policies will cause less confusion with managers and onsite teams. If your property or tenants receive federal subsidies and are subject to federal regulations banning the use of marijuana, you should adopt a

5 prohibition policy to avoid being in violation of federal regulations and potentially losing subsidies. For a complete discussion of medical marijuana policies, see the February 2010 and May 2011 issues of Landlord News, available to clients at our website (thslawfirm.com). While the establishment and the regulation of a marijuana industry has little legal effect on Colorado landlords in the short run, the practical effect over time may be more significant. While there are no precise statistics, studies show that twelve to fourteen percent of the population regularly uses marijuana. Nearly, fifty-five percent of Coloradoans voted to legalize marijuana, including the establishment of marijuana retail stores. Whether marijuana retail stores become a reality remains uncertain given the conflict between federal and Colorado law. However, if marijuana retail stores become a reality in 2014, marijuana use may or could become widely accepted in Colorado society. Thus, similar to smokers (20% of the population), marijuana users could constitute a significant percentage of the rental population. Thus, Amendment 64 may result in landlords having to decide whether they want to forego renting to a significant percentage of potential tenants.