Landlords Can’t Recover for Property Damage

by Chris on July 6, 2015

Rental property owners in a quiet suburb of Denver are still reeling from the discovery that their seemingly nice tenants converted the basement of their rental home into an illegal pot grow operation. In the process, the tenants caused tens of thousands of dollars of damage.

tenant screeningNow, the rental house is vacant and the basement in shambles. The illegal pot was confiscated. The tenants are facing criminal charges and it’s unlikely they’ll pay for the damage. The insurance company won’t cover the claim. The neighbors probably aren’t very happy, either.

This scenario is becoming all too familiar as landlords and tenants struggle to interpret the sketchy framework of regulations that define the “green” movement sweeping the nation.

Another increasingly common source of property damage is converting legally obtained marijuana into a more concentrated form. Producing “wax” requires the use of flammable liquids. The alarming number of explosions and apartment fires throughout Colorado has prompted the state’s legislature to pass regulations prohibiting the practice.

The lack of specific regulations, along with misperceptions regarding what tenants can and can’t do with marijuana has become a perfect storm for landlord tenant disputes in all states, not just those that have legalized recreational pot. For instance, some tenants believe that the federal government has turned a blind eye and will not raid homes or prosecute marijuana possession cases.

Often, tenants feel they have the legal right to use or grow marijuana in their homes. But in reality, this typically is not the case. If landlords do not know their rights and responsibilities with respect to regulating marijuana in rental units, they risk income loss.

It is not clear in the Colorado case whether these first-time landlords ran a criminal background check or verified the tenants’ source of income, but it is clear that they had a good feeling about the tenants, at least initially. It wasn’t until neighbors complained that the landlords visited the property, and discovered new walls had been erected to divide out the crops, and a giant humidifier and grow lights had been installed. Now, all that needs to come out, and the property repaired.

One tenant allegedly has a criminal background and served more than three years in prison for drug-related crimes before moving to Colorado, according to a local news report. He also told the landlord he was setting up a senior care center. He did not disclose the intention to grow marijuana.

When confronted, one of the tenants claimed that he and two other family members had the right to grow hundreds of pot plants for their combined medical use. He asked the landlords to check with the county to make sure their grow operation was legal. According to the report, it was not.

This case is further evidence that bad tenants tend to seek out inexperienced landlords who may not run tenant background checks or keep tabs on the rental property. Fortunately, the same tenants screening tools used by large property management companies are available to individual landlords.

 tenant screeningScreening tenants remains the single most important way to avoid property damage and to collect against a tenant should damage occur. Effective screening policies include a fully completed and verified rental application. Not only does this allow the landlord to flag problem tenants, that information will aid in locating a former tenant and his or her assets, if it comes to that.

Running criminal background checks, along with eviction reports and credit checks is the safest and most cost-effective way to flag a tenant who has a bad history.

The landlords in this case admit that this was a learning curve for them. Going forward, they told reporters they will be more diligent in getting to know their tenants, and inspect more frequently. One of the landlords says she will consider collecting rent in person from now on, just to have an excuse to go over to check on the property.

This sort of damage can happen anywhere and to any rental property owner, so landlords need to confront this issue head-on, especially as more and more states are considering legalization of either medical or recreational marijuana. The laws in each state differ, so it is important to seek legal advice. Many landlord law firms are coming up to speed on pot laws and can offer up-to-the-minute advice on effective lease changes and policies designed to protect the rental property.

Marijuana use and possession remains illegal under federal law. Grow operations can be raided by federal officials. That alone may be enough to evict a tenant for marijuana use. However, legal experts agree that the best practice is to state your policy upfront and include it in the lease agreement to avoid any confusion down the road.

Typically, both medical and recreational marijuana use can be prohibited in a rental home. Marijuana smoking can be included in a smoke-free policy. Experts also suggest including an anti-drug and anti-crime policy with the right to evict, along with the right to boot a tenant for causing disturbances or damaging the property, and restrictions on commercial uses in residential properties. If the case goes to eviction, the landlord must point to specific provisions in the lease that were violated. If the lease is silent on pot issues, then it is harder for the judge to grant an order for possession and it may take longer to recover the property.

Because these laws are still developing, find ways to stay up to speed:
1. Join a local landlord association that allows you to network with other landlords and provides updates on changes in the law;
2. Participate in a local Crime Free Multi Housing seminar sponsored by local police; and
3. Ask your attorney to email you timely updates.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 1 comment… read it below or add one }

Teresa Aust August 15, 2018 at 7:50 pm

Good information, the state of Missouri has not yet passed a law for medical or recreational use of marijuana. I don’t think that I would become a property manager any time soon.

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