Successful real estate investors understand having a solid long-term business strategy is key. Part of that strategy is staying up-to-date on changes in state, local, and federal law, and how they may impact rental activities. The situation is becoming more complex as we see an increase in states enacting new laws legalizing marijuana for both medicinal and recreational purposes. In areas where marijuana hasn’t become legalized yet, experts agree the best investment strategy for property owners is drafting a plan for a future where marijuana is legal nationwide.

Anticipating Change

A quick survey regarding laws governing the use of marijuana shows an acceleration of new legislation in recent years. Ten years ago, there were 13 states with laws allowing medical marijuana and zero allowing recreational use. At the end of 2018, 33 states and Canada have legalized medical marijuana, and 10 of these states allow recreational use. As pressure to legalize marijuana continues to grow, more states are likely to follow. It is entirely possible that major federal marijuana reforms will not be too far behind.

Potential Impact

As the legalization of marijuana potentially becomes more widespread, it’s important to consider the impact that resident use can have on a property. Banning activities like smoking and vaping in rental homes is widely accepted. If the rental agreement clearly states prohibitions, the law generally sides with an owner. Tobacco smoke and vapor cause substantial damage to a rental property. It leaves residue resulting in stains and unpleasant odors. Despite the widespread misconception that vaping is harmless, vapor can create a sticky film on all surfaces. This film is as difficult to remove as smoke residue and can cause serious damage to interior elements.

Medical Use Accommodations

Marijuana is no different in terms of the potential damage to rental properties. Walls, ceilings, blinds and carpeting will quickly show damage from exposure to marijuana smoke or vapor, creating expensive repairs beyond normal wear and tear. For this reason, bans on smoking should include marijuana as well. However, under the Fair Housing Act, a resident with a medical condition can request accommodations to have medical marijuana on the property. Denying a request could result in a lawsuit, placing property owners in a bit of a bind with conflicting federal laws.

As of now, federal laws prohibit marijuana usage, both medical or recreational. In states where marijuana has been legalized, the presence of marijuana on a property increases the risk of criminal arrests and asset seizure. Some insurance companies won’t write policies on rental homes where marijuana is permitted or charge additional premiums. Either situation increases your financial exposure and erodes profitability of any rental property. Property owners will only benefit from having a plan in place for dealing with situations when the time comes.

Planning Ahead

Property owners can prepare for legalized marijuana in several ways. Understanding the laws in your area is an important step. Each state has unique statutes about medical and recreational marijuana, as do some local municipalities. You should anticipate resident inquiries about marijuana use and include language in lease documents that clearly state your policy. As marijuana use becomes more common, deciding how to handle it in advance can better balance liability with resident satisfaction. Property owners can better mediate the risks that changing laws may bring by having a plan.

This is where a national property management company like Real Property Management becomes an invaluable resource. As industry experts, they help property owners prepare for future changes in the law while also protecting the value of each investment.

  • Lukas Krause

    Lukas Krause is the President at Real Property Management , the largest residential property management franchise organization in North America, managing tens of thousands of properties for individuals, investors, and institutions through the country. Learn more at or call 888.806.7088.

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