Transactions and Regulatory Committee Housing Committee (information only)
April 19, 2011
Issue: Should C.A.R. provide additional guidance to Realtors(r) or adopt additional policy positions regarding marijuana in relation to real estate transactions?
Options: 1. Do nothing. This option presumes existing policy is adequate. 2. Request C.A.R. Legal Department to more broadly publicize or distribute existing materials on marijuana. 3. Request that C.A.R. develop additional guidance, disclosures and forms for Realtors(r) regarding marijuana issues. 4. Other
Status/Summary: The Lake County Association of Realtors(r) has requested that C.A.R. consider and provide guidance and disclosure forms on marijuana related issues. The Association cites three issues related to marijuana. It may be more appropriate to seek a legal opinion, but the Association specifically requested that the appropriate committee (i.e. Transactions and Regulatory) consider the issues: 1. Whether agents must disclose whether they are aware of prior cultivation of medical marijuana on a property. 2. What options exist for a landlord or property manager in a situation where a tenant in possession of a medical marijuana "prescription" either seeks to cultivate, or is discovered in the process of cultivation of, marijuana against the wishes of the property owner. 3. Finally, may a property be advertised as appropriate for the cultivation of marijuana?
The Legal Department issued the following advice for property managers that did not wish to permit marijuana on the property:
According to the C.A.R. Legal Department, the tenant should be informed, verbally and in writing, that notwithstanding the prescription for medicinal marijuana, it CANNOT be possessed or used on the rental property at any time. As long as the tenant complies with such a rule, the tenant should not have his or her tenancy terminated. Finally, this prohibition should also be reflected in the rental property's governance rules.
C.A.R. has also considered tenant use/cultivation of medical marijuana on rental premises in the context of Proposition 19 of 2010. The proposition would have, among other things, established a right of tenants to possess and cultivate a limited amount (up to 25 square feet) of "personal use" marijuana even on rental premises. C.A.R. took a position of "OPPOSE;" the ballot proposition was ultimately defeated.
Marijuana presents particularly difficult questions because while some use appears to be legal under state law, it is illegal under federal law - and federal law contains strict penalties, up to and including potential forfeiture of the premises where the law is violated. In addition, some property managers fear that to deny a tenant the ability to use a "prescription" drug is somehow illegal discrimination.
What if the property has been used to cultivate marijuana? The law, and C.A.R.'s historic position, has been that any known material defect must be disclosed in a transaction. The classic definition of materiality is whether the item would change the willingness of a buyer to buy, or the price at which the buyer would buy. Some facts, like structural defects are almost always material. In addition, individual idiosyncratic concerns, if they are known in the negotiations, may make a fact material that would otherwise not be so. For example, an unusual allergy or a pathological fear of ghosts, might raise the status of otherwise mundane information to the level that they must be disclosed as material to the transaction. Staff is unaware of any general rule that would make prior cultivation or use a sufficiently material fact that would need to be disclosed.
What if the landlord or property manager wants to prohibit the use or cultivation of marijuana on the premises? As noted above, C.A.R.'s legal department has previously opined that the activity may be prohibited by the property owner or his or her agent. The current list of C.A.R. Legal Articles "Q&As" does not include an article on medical marijuana use, and the last opinion cited was in 2008.
Is it appropriate for staff to request that Legal include an Article on the subject as part of its updating of Q&A's?
Can an agent advertise a property as "suitable for marijuana cultivation?" While so-called commercial speech is sometimes given less protection under the law than other types of speech, even advertisements are given relatively free rein so long as they are not defamatory or demonstrably false. Unfortunately, there is unlikely to be a hard and fast rule available, particularly in this murky area - any decision will be driven more by the individual facts than the law. However, if the legal department were to commission an advisory article on the subject, it might include factors to consider in evaluating the legality of an advertisement. Of course, what is legal may be very different from what is socially acceptable or politically popular in a particular community.