Keeping the druggie money
Investor · Becker, MN · Member since 2014 · 144 posts · 82 votes
Keeping the druggie money
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Richmond, VA · Member since 2015 · 19 posts · 18 votes
10yIf marijuana makes you a "druggie" then our past three presidents and three states in the West have some explaining to do.
Why not base the security deposit on the actual condition of the apartment? If it's otherwise undamaged, why do you care? You wouldn't kick out a tenant who was caught on a DUI, would you?
47 Replies
- Richmond, VA · Member since 2015 · 19 posts · 18 votes10y
If marijuana makes you a "druggie" then our past three presidents and three states in the West have some explaining to do.
Why not base the security deposit on the actual condition of the apartment? If it's otherwise undamaged, why do you care? You wouldn't kick out a tenant who was caught on a DUI, would you?
- Real Estate Broker · North Richland Hills, TX · Member since 2013 · 1k+ posts · 607 votes10y
I'm no lawyer, but your stance seems inequitable to me. Did the pot hurt the condition of the apartment? Was him being high any worse than other residents being drunk? Is pot somehow worse than alcohol? Are you sure he didn't have a prescription for medical marijuana?
I certainly wouldn't want a drug dealer, or a user of more dangerous drugs (i.e. meth, heroin, etc.) living in my units, but I'd be less concerned about a pot user than an alcoholic.
- Investor · Katy, TX · Member since 2015 · 32 posts · 19 votes10y
"The building is full of mostly great people, but there was one fellow that always smelled like pot."
Menace to society that guy...Trust me, there are worst things out there. But if you want bad Karma, keep the deposit.
- Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes10y
Give him back his deposit if the unit is in good shape.
I'd think the intent of that addendum is more related to a drug related arrest on the property, or something of that nature. Not finding a bag of pot after the tenant left willingly.
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
Just because something is in the lease, does not make it legal or enforceable. It wasn't YOUR addendum. What if it isn't enforceable and the guy knows that and takes you to court?
I'd assess the state of his apartment, deduct any damaged items with a full accounting of how you spent the money - which is your obligation as a landlord - then send any remaining money back to him.
- Investor · Becker, MN · Member since 2014 · 144 posts · 82 votes10y
Wow, I guess my attitude toward pot is different that the majority here. My attitude as a landlord is, I try to provide a place that I would want to live. People with small kids were complaining that they don't like smelling pot in the building, and I guess I don't blame them. He was on a month to month lease, I want to get a tenant who is drug free.
@Chris SoignierYes, I'm sure that he doesn't have a prescription. In Minnesota, medical marijuana is in liquid or pill form. Even if pot was legal I'm not sure my stance would be any different. Cats are legal in the state of Minnesota, I chose not to allow them in my apartments. The units are also "no smoking".
@Account ClosedThanks for your input.
- Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes10y
Originally posted by @Tim Johnson:
Wow, I guess my attitude toward pot is different that the majority here. My attitude as a landlord is, I try to provide a place that I would want to live. People with small kids were complaining that they don't like smelling pot in the building, and I guess I don't blame them. He was on a month to month lease, I want to get a tenant who is drug free.
@Chris SoignierYes, I'm sure that he doesn't have a prescription. In Minnesota, medical marijuana is in liquid or pill form. Even if pot was legal I'm not sure my stance would be any different. Cats are legal in the state of Minnesota, I chose not to allow them in my apartments. The units are also "no smoking".
@Account ClosedThanks for your input.
I am not disagreeing with you wanting to get him out. I agree with that in a multifamily situation such as this. I would feel the same way about cigarettes which are legal.
I just view the security deposit as being there for you to recoup costs associated with re-renting the unit. If you've experienced no costs, the guy left willingly and left the unit in good shape(no residual odor, etc), I don't see any reason to penalize him financially.
If the guy takes you to small claims for the deposit, how are you going to prove that he was indeed doing this in the unit? If you didn't call the police to take the pot and document it, then you're likely not going to be able to use that as a basis for keeping the deposit.
- Investor · Saint Paul, MN · Member since 2016 · 8 posts · 3 votes10y
Lease agreements are there for a reason. Maybe this tenant will think to read the agreement and comply...
I say keep the deposit for the sake of our fellow Landlords.
- Investor · Mentor, OH · Member since 2015 · 19 posts · 12 votes10y
Well aren't we a tolerant bunch? After reading the initial post, I was expecting more comments demonizing that pot smoker, who must be bad person and deserve what he gets. After further consideration, I was pleased to remember that this is a forum for rational and responsible people, not those it-should-be-illegal-to-offend-me folks.
My "crime free" lease addendum includes provisions allowing an eviction over suspicion of criminal activity, so I agree with @Chase Gochnauerthat the intent is to deal with disturbances, not provide for a penalty.
Of course, you could take advantage of the situation with the expectation that the dude will be just too lazy to fight you for the deposit, especially since he'd have to go to court and talk about his illegal material. But if it was me, I would document legitimate repairs or damage just like any other move out and return the balance.
- Investor · Becker, MN · Member since 2014 · 144 posts · 82 votes10y
Thanks for your comments, everyone. I appreciate this community and the variety of opinions. I think a diversity of viewpoints is a positive thing.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
@Tim Johnsonit doesn't surprise me people are forgiving because it is pot. Many people are more tolerant of pot than even cigarettes. Pot arguably smells better, but that is besides the point. People confuse their personal feelings about legalization with the fact that as a landlord you cannot have illegal activities in your property. I am in total agreement that you did the right thing asking him to leave. If he stayed, you could run good tenants out or attract more illegal activity, neither is good for you as the landlord.
I would only take money from the security deposit to remedy actual damage which could include odors if there are any. Lets say you keep his money for finding the pot. He is unlikely to challenge you in court because that would be admitting to something illegal. Or he could challenge you and then you are stuck proving he had pot in the property. Have you called the police? Is the pot in your possession? Do you plan to keep it as evidence? This whole thing rapidly deteriorates into a mess. The worst case would be that you keep his money and he gets mad and retaliates by damaging your property.
My advice is to throw the pot in the garbage and don't ever discuss it with the guy. Handle his deposit based on the condition of the property. Don't call the police or do anything that sucks you into some drawn-out drama. You are running a business, not fighting a moral crusade. Find the path of least risk for yourself and move on.
Good luck!
- Investor · Irvine, CA · Member since 2015 · 373 posts · 205 votes10y
First, I would say that unless you reported the pot to the police, and then they advised how to destroy or they confiscate I would image your lease drug paragraph would have no legal merit in a court of law and or may be cause to find you guilty of a crime had you not notified the police.
Second, as many others have said, you should base the deposit return on the condition of the apartment unit.
Third, just because you can, doesn't mean you should.
I liken the security deposit return to that of a 'personal guarantee'. A security deposit assures, to some degree, the rented premises can be returned to their former condition before the tenants occupancy. Likewise, having a personal guarantee will make tenants think twice before skipping out and abandoning a premises, but they're only good if the holder is willing to pursue legal means of recourse to enforce the guarantee.
I was very fortunate to have worked with a client when I was very young in my CRE career who built a multi billion dollar company (and net worth) as he was building his company. I began representing them when the company was doing just over $10MM in annual revenue, meaning they were a teeny weenie company in the overall scope of things. And they leased and then out grew facilities like every six months back then, seriously. So a big part of my work was subleasing their old facilities.
There were literally dozens of these subleases we completed. Because the majority of the properties where in the urban core, and the time was the early 90's when there were literally hundreds and hundreds of competing properties on the market because of the S & L crises, we sometimes had a hard time finding tenants.
When a tenant was found, they often didn't have the financial resources to secure a lease. Many were start up companies in that specific industry, since the property was specialized, and they didn't even have revenues. My solution was to recommend personal guarantees to secure the lease if the tenant defaulted. I learned a very valuable lesson with the clients response.
He simply said
"If I accept a personal guarantee as security of payment then I must be willing to use such guarantee to collect. The question I must then ask myself is, am I willing to sue to enforce payment, and then use a judgement to evict this man's family from their family home simply because his business cold not pay rent? I could not live with myself if I place that much importance on money.
Just because you can, doesn't mean you should".
Guarantees, deposits, and pinky swears aren't designed as profit centers.
- Phoenix, AZ · Member since 2015 · 10 posts · 7 votes10y
One person pays rent on time, and leaves when evicted hassle free, but smokes pot.
Another person considers taking someone's security deposit not to actually use it for repairs, just on a matter of their own individual morals, as a way of teaching them a lesson.
I know who I'd rather do business with.
Anyways, hope OP doesn't end up in court due to a lawsuit over this, or in court over mishandling the marijuana that they possessed after their tenant left. - Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
Originally posted by @Christopher Telles:
When a tenant was found, they often didn't have the financial resources to secure a lease. Many were start up companies in that specific industry, since the property was specialized, and they didn't even have revenues. My solution was to recommend personal guarantees to secure the lease if the tenant defaulted. I learned a very valuable lesson with the clients response.
He simply said
"If I accept a personal guarantee as security of payment then I must be willing to use such guarantee to collect. The question I must then ask myself is, am I willing to sue to enforce payment, and then use a judgement to evict this man's family from their family home simply because his business cold not pay rent? I could not live with myself if I place that much importance on money.
Just because you can, doesn't mean you should".
Guarantees, deposits, and pinky swears aren't designed as profit centers.
Are you saying he wouldn't accept personal guarantees or that he wouldn't follow through on taking personal property? I guess I don't see this as black and white. In other words, he could request a personal guarantee as a way to make sure the tenant didn't just walk away for no reason. If the tenant feels they have nothing to loose, there is no incentive. He would not need to sue them if something went wrong. I have had situations in the past where I chose not to sue someone for money I was obligated either because they had hardship or because I felt I would never get the money anyways. My point is just that having an option to do something doesn't mean you need to do it.
I fully agree that deposits are not profit centers. I have said that exact statement more than once. In fact, I often give back more deposit than I should if I feel there was a serious effort to leave the property in good condition. If you are in business for the long haul, you have to treat your customers right. Tenants are your customers and your good or bad reputation will spread.
- Investor · Irvine, CA · Member since 2015 · 373 posts · 205 votes10y
@Joe SplitrockOn my recommendation we would request a personal guarantee so the tenant felt their feet where to the fire so to speak, but never was there an intention to execute on enforcing the guarantee. The tenant never knew this was the case, but it was clearly an instruction to me that alternative actions would be required should the tenant(s) begin to display problematic behavior.
On more than one occasion those particular subtenants asked "what happens if I just walk away" and my response was always "remember, you signed a personal guarantee" never adding anything more and then changing the subject.
Thankfully, I never had to engage a significant default with those that evolved into problem tenants (other than really late rents) and was able to resolve any issues through continuous communication with the tenant. In a couple of instances a new tenant was found to replace the original sublease tenant, and I structured a full release from the sublease providing the sublessee met the conditions for a full release. I only cared about getting the space back on time for the new tenant and in a condition where the new tenant could move in and begin operating immediately.
This required a lot of additional work on my part, and I executed these re-lease subleases for no fee, but it solved a business problem for the client and he was always glad to hear the course of action led resolving a business problem he wouldn't have to spend time addressing.
In return for my efforts, I got to spend a tremendous amount of time around a brilliant business mind.
- Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes10y
Originally posted by @Tim Johnson:
The units are also "no smoking"..
If the units are non-smoking and you have to clean the units in a manner to remove smoking odors and stains, then by all means keep the deposit. Just be sure to itemize your cleaning costs to reflect the damage from smoking.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes10y
Dave ? Dave's not here .
- 10yZach KiddPro MemberReal Estate Agent · Clearwater, FL · Member since 2015 · 176 posts · 148 votes
Firstly, it's your building, and your tail (physical and fiscal) on the line if something goes sideways. I can completely understand being cautious.
Suspected dealing? Yeah, out on the street immediately.Personal consumption, though, is a tough call, and definitely a local call. There are states where it's cool, places where it's as bad as a parking ticket, and places where they either ignore or go gangbusters over it.
My local (but big city) mayor & cops just busted a Golden Girls penny ante poker game, because the stakes amounted to more than $10. (Grrr Flori-duh).
I wouldn't want that kind of enforcement targeting my buildings regardless of my personal feelings on the matter.
Now, given the scenario as you described it... it's after the fact, and the only downside is principle and a few hundred bucks that you have no other reason not to return.
I would happily let them go on about their merry way without any further dealings.
- Investor · Plano, TX · Member since 2014 · 145 posts · 102 votes10y
I personally would not have asked him to leave unless the odor or smoke was bothering other tenants. I would refer to what @Randy E.said though. If you have an anti-smoking policy and if the apartment has clear smoke odors, I would follow the same rules as you apply toward any cigarette smoke.
- Los Angeles - Tujunga, CA · Member since 2016 · 29 posts · 11 votes10y
If you end up in court how can you prove it belonged to your tenant. As mentioned already I would throw the pot in the trash asap. You are the one now in possession of an illegal substance.
- Saint Paul, MN · Member since 2015 · 8 posts · 3 votes10y
Hi Tim!
You might want to contact Live Smoke Free in Minnesota in the Twin Cities. They have resources in helping landlords go smoke free in their buildings and might have some resources for you to see if you can enforce penalties/keep security deposits for someone violating your drug free lease addendum.
My three buildings in MN are managed with a no tolerance for smoking anything (even e-cigs) on the entire grounds (outdoors included) policy. I have a policy that my tenants sign agreeing that if they themselves or a guest is found to be smoking anywhere on the premise, a smoking fee will be assessed. This fee is separate from their security deposit.
The MN statutes on what the security deposit can be kept for is pretty specific. MN also has some harsh repercussions for landlords if they should have returned a deposit, so I'd personally be nervous testing out in court if you can take the tenant's security deposit, even if you had a clear addendum. (But- I'm not an attorney!)
Good Luck on making your decision on whether or not to keep the security deposit. And I'm guessing your other tenants appreciate you enforcing a drug/smoke fee building!
Maria
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes10y
Here the Minnesota statute on the handling of security deposits
If it were me, I'd talk to an attorney before withholding anything but material damages--which it looks like you have the burden of proving.
- Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Give him his money back unless the place is actually damaged. I really can't believe you'd consider keeping it.
Marijuana is FAR safer than alcohol, etc. But hey, I'm biased as I've seen many people get off opioids and other prescription pills, and turn their lives around. Oh and it brought $1Billion of sales to my State last year.
- Rental Property Investor · Davenport, FL · Member since 2013 · 285 posts · 220 votes10y
If they left a baggie, who cares? If they used your property as a grow-operation, that's another story. It is a good thing that tenant is gone and you will be able to use your own judgement with the next. In this case, I would throw away the pot and return the deposit based off the condition of the unit.
I'm not sure this would be enforceable in court and I know I would not want to deal with the headache, but you could keep the deposit, notify the tenant of your reasoning for withholding the entire deposit, and if it ever escalated to anything more you could just release the deposit beyond damages as a settlement.
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