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Conflicting Laws and Their Affect on the Real Estate Market

by | Dec 16, 2015 | Real Estate Law


Most would agree that very little guidance has been provided for those who are feeling the deep divide between federal and state governments in recent years as the matter of marijuana legalization places many involved in the real estate and housing industry in an uncomfortable and vulnerable spot. It’s a complex issue. How should southern California property owners comply with federal and state obligations regarding tenant rights and housing related matters when they two separate entities are contradicting each other?

Many states have not only legalized the use of marijuana for medical purposes, but for recreational use. The legalization of “pot” for recreational purposes held the potential to create tax revenue in the millions. In fact, after the legalization was in place, the legal recreational marijuana sales in the state of Colorado actually brought in $3.8 million in tax revenue during the first two months. In accordance with these numbers, state-licensed marijuana retailers project $100 million in taxable revenue streams annually. This is more than double the tax revenue collected on behalf of alcoholic beverages ($40 million brought in by tax revenue from alcohol in 2013 in Colorado).

Residential property owners can see why the state wants legalization. It’s profitable. The problem for southern California property owners is that by allowing marijuana use on the premises of their property (in accordance with state law), they are at risk of penalties from the federal government. Such penalties could include losing buildings through civil forfeiture cases, etc. On the other side of the issue, property owners could find themselves threatened with legal action for banning pot use on their property due to state level legalization of marijuana.

While lawmakers are currently working to address the contradiction between state and federal laws regarding marijuana use in states where the product is now legal, residential property owners may currently feel unprotected by the very laws that were meant to keep them and their property safe. Landlords who receive federal housing subsidies are dealing with an even more intense entanglement with tenants lawyering up to protect their right to protect what has legally been offered to them by the state without losing their tenancy.

If you are a southern California property owner or manager and you need assistance dealing with the contradiction between state and federal law in regards to marijuana use on the premises, contact the southern California real estate attorneys at The Law Office of the Law Office of Ernesto Aldover.