Why legalising marijuana impacts real estate

Photo credit: HUS0

Weed and property have always enjoyed an association, with dealers often taking advantage of vacant homes in foreclosure-hit towns to grow marijuana - or tenants growing plants without their landlords' awareness.

Now, though, marijuana is become increasingly accepted by a variety of US states. According to the National Conference of State Legislatures, 23 states and the District of Columbia have passed comprehensive laws permitting the prescribed medical use of marijuana, with 11 states permitting limited possession and use, and three states permitting recreational use. (Federal law prohibits the use, possession or sale of marijuana for medical or any other use.)

The changing perception and legal status in a range of states has potential impacts on all types of real estate transactions, from residential and commercial brokerage to property management and leasing, warn experts speaking at a NAR conference this week.

"There could be legal and financial implications for their real estate-related transactions and the clients they are helping buy, sell or lease properties," cautions the association.

"While the legalization of marijuana has more obvious implications for residential and commercial property managers who have to deal with a variety of landlord-tenant issues, it’s also creating challenges for community and condominium associations and federally assisted rental housing," added panelist Megan Booth, senior policy analyst for the National Association of Realtors.

According to Booth, as laws Change, multifamily properties and condos may be required to add lease addendums or modify their association rules to clarify policies on marijuana cultivation, distribution and use.

During the session, speakers addressed areas of concern for residential owner-occupied properties; residential property management; commercial and land properties and property management; and human resource management at commercial office spaces. Those concerns included liability and disclosure issues for agents and property owners, property damage and remediation, and health and safety risks.

There are also additional considerations for properties where marijuana is being grown, such as potential impacts on neighbors, tenants and properties, including smoke and odors, mold from the high humidity levels needed for growing, expensive utility costs for lights and water, and even the possibility of explosions during manufacturing of related products.

Pauline Aunger, a Realtor in Ottawa, Canada, said there are similar concerns about marijuana growing operations in Canada, where national law permits the possession and use of medical marijuana (although a production license is required to grow marijuana for medical purposes).

Aunger said illegal marijuana growing operations in apartments, homes and commercial spaces are becoming a common challenge for Canadian police and for property owners who lease those spaces to tenants and could face property damage and legal risks from their tenant’s growing activities.