Evicting a Commercial Tenant: Medical Marijuana Dispensaries

In recent letters sent to landlords of medical marijuana dispensaries, the Drug Enforcement Agency (DEA) has informed landlords that the sale of medicinal marijuana is illegal under federal law. The DEA asserted its right to confiscate the landlord’s property, in accordance with the law of civil forfeiture.

Can a Medical Marijuana Dispensary Be Evicted Under State Law?

Can landlords evict medical marijuana dispensaries based solely on the DEA letter?  Pot clubs are “commercial tenants,” not private residents. In business agreements between “merchants,” the law assumes that both parties are sophisticated, such that they should know about the contracts they sign. So, if no provision is included in the lease about illegal activity, the landlord may not have an obvious reason for eviction.

An eviction is a state proceeding. Under California law, medical marijuana dispensaries are legal, but under federal law, they are not. However, a California court would probably authorize an eviction in this case, since a raid by the DEA could have profound effects on the landlord’s property. For example, in 2007, the DEA closed an Oakland pot club, confiscated the landlord’s property worth almost $400,000, and he was sent to federal prison.

On the other hand, a California court may be hesitant to undermine the authority of state law allowing medical marijuana dispensaries. Despite the DEA’s letters, to date no landlord keeping a “low profile” has had his property forfeited. The court may consider whether the DEA has the resources to do so. The DEA has only charged people with direct involvement in the cultivation and sale of marijuana, and those who made large profits. In the case above, the landlord knew of the illegal activity, and even “controlled and directed” it at certain times.

What Can a Landlord Do?

The best defense a landlord has to a DEA civil forfeiture is to evict the offending commercial tenant. In many states and cities though, the landlord must have a “just cause” in order to evict a tenant. Breach of contract is typically the reason given if the landlord is afraid of DEA action, but breach of the lease is dependent on the specific language of the lease.

For instance, a contract in California which requires a tenant to operate a business for a “lawful purpose” would not result in the operation of a medical marijuana dispensary being in breach of the contract. The reason is that California courts will find that a medical marijuana dispensary is “lawful” under state law, and thus would be enough to comply with the contract, even though such a dispensary would illegal under federal law.

On the other hand, a contract which asks a tenant to follow “all applicable laws” will also be subject to federal law, which outlaws the sales of marijuana, for any reason. A contract which contains this phrase would allow a landlord to evict a tenant selling medical marijuana.

An attorney for a medical marijuana dispensary landlord without an illegal activity clause in the commercial lease may advise the landlord to apply for a “writ of possession” at the superior court.

Do I Need a Lawyer?

Landlord-tenant law is very complicated and constantly undergoing changes. These laws are even more complicated because laws concerning marijuana can differ between states, and even cities. An experienced real estate attorney can help you identify the law that applies to you and represent you in court.