Last month, I discussed the risks to a commercial landlord leasing to medical marijuana enterprises (“MME”) when the tenant’s business operations violate local ordinances. This post discusses the commercial landlord’s greater risk of losing ownership of their commercial property. This week, the federal prosecutors in California announced that they will begin targeting commercial landlords leasing to MMEs by filing “civil forfeiture lawsuits against properties involved in drug trafficking activity.” Their goal is to force real property owners to ensure that their property is not used to promote illegal activities.
Under Civil Forfeiture laws, any real property from which illegal drugs are sold can be seized and taken by the government. In a civil forfeiture action, the property owner is not accused of any crime. Interestingly, it is the property that is sued. The Federal Government files suit against the property and names the property owner as a third party claimant. The Federal Government need merely establish probable cause that the property was used for an illegal purpose. The burden is on the property owner to prove by a “preponderance of the evidence” that the property was not used for illegal purposes or that the illegal use was made without the property owner’s “knowledge, consent, or willful blindness.” The commercial landlord will spend large sums of money in attorneys’ fees in an attempt to keep its property. But, in the end, the commercial landlord will more than likely lose if its tenant was, in fact, selling marijuana from the premises.
Commercial property owners leasing space to tenants operating a MME should take all steps to minimize their risk. The Federal Government stated that it will be sending out warning letters to property owners and lien holders. Commercial landlords are advised to heed these warnings and take steps to remove the offending tenants from their property. The landlord should immediately serve the tenant with a Notice to Perform (i.e. stop the illegal activity) or quit the leased premises. If the tenant fails to stop the illegal activity, the landlord should follow through with an unlawful detainer to remove the tenant from the premises.