NUTS & BOLTS
RISK MITIGATION
MARIJUANA Recreational marijuana use is now legal in eight states, and more than 20 have implemented laws legalizing it for medical uses so far. Legalization has brought new questions into the tenant screening process. Though you should always follow Fair Housing laws, be sure you are also clear in your lease on your stance on both illegal and legal drugs. You may need to check with a local legal expert to find out how far you can go in terms of prohibiting marijuana usage before inserting this language. Tenants should be made fully aware of the conse- quences if an illegal or unauthorized substance is found on the premises. Populations who may use medical marijuana and may also have protected rights under Fair Housing: • Seniors – arthritis relief • Cancer patients – pain relief • Veterans & PTSD – anxiety relief • Those with chronic conditions – management of stomach and intestinal issues, epilepsy As far as physical damage is concerned, marijuana grow op- erations inside your property could cause mold issues which can be costly to fix and are often excluded from insurance coverage. While you may be required to permit use on your property, you are not required to permit cultivation on-site. OPIOIDS, HEROIN, AND COCAINE According to the U.S. Department of Health and Human Services, drug overdose deaths are the leading cause of injury death in the United States. Of those drugs, the abuse of opioids, a class of very strong painkillers like OxyContin, Percocet, and Vicodin, has quadrupled since 1999. Morphine and heroin are also a part of the opioid class as they are also opium-derived. Though non-opioid, cocaine is also one of the most highly addictive illegal drugs out there. Lifestyles these of addicts may lead to general neglect of the property, an inability to pay rent and undesired guests at your property. SMOKING/VAPING Let’s not forget about the most common recreational drug: nicotine. Smoking or vaping may not be anywhere near as destructive as a meth lab, but the odors and residue left be- hind from smoking can be hard to remediate. Smoke damage may cause you to have to replace carpets, wall coverings and sometimes even flooring (think cigarette burns in the linoleum). Smoking can also become a serious fire hazard if someone falls asleep cigarette in hand. Your tenant may un-
wittingly burn your property down or worse, not make it out.
A QUICK NOTE ABOUT DRUGS AND INSURANCE
The exclusions below may have a bearing on any insurance funds available to help you with repairs, depending upon how your insurance carrier defines damage resulting from drug use. The best rule of thumb is to check with your agent before you have a problem to make sure you understand what is covered and what is excluded. BIOLOGICAL/CHEMICAL MATERIALS EXCLUSION: Excludes damage caused by the use of pathogenic or poisonous biological or chemical materials. SEEPAGE/POLLUTION/CONTAMINATION EXCLUSION: Excludes damage caused by any material designated as a “hazardous substance” by the EPA or as a “hazardous material” by the Department of Transportation, toxic, dangerous, hazardous or deleterious substances, and the release of anything which endangers the health, safety or welfare of people or the environment. MOLD/FUNGUS EXCLUSION: Excludes damage caused by mold, mildew, fungus, spores or microorganisms whose presence poses a threat to human health. First things first, be selective of the neighborhoods in which you buy. One tool we’ve found to help gather detailed demographic information about a property pre-purchase is RentFax. Take spe- cific note of a property’s crime index and the vacancy rate in the area as these may help you make a purchase with less risk for drug activity. If you live in the area, take notice of the condition of the surrounding neighborhood as you drive there. Are there a lot of boarded up buildings? Buildings with bars on doors and windows, peeling paint, or are many of them in a state of disrepair? Fair Housing Act: The Fair Housing Act is a federal act intended to protect buyers and renters from seller and landlord discrimination. Most landlords know that they cannot discriminate on the basis of race, color, religion, sex, familial status, disability, handicap, or national ori- gin, but there are additional facets to this legislation and many additions as well as a few exceptions have been added since the original bill passed in 1968. AVOID A DRUG PROBLEMAT YOUR PROPERTY Pre-Purchase Diligence
Don’t Let Drugs CookYour Investment Property HOW TO INSURE AGAINST DRUG MANUFACTURE IN YOUR RENTALS.
by BreAnn Stephenson
hat’s on the menu for November? Turkey, of course! However, thanks to the rising popularity of certain drugs and controlled substances, more and more landlords are finding their tenants cooking up something else in their home this holiday season. When we think of drug use and in- vestment properties, the dreaded meth house is usually what comes to mind first, but there are a broad range of substanc- es, both illegal and now legal in some states, that may cause major issues for you and your property. A little prep work can help you avoid being served an unpleasant surprise. WHEN THE “HOUSE SPECIAL” GOES BAD You know that star or cute little icon next to the most pop- ular dishes on the menu? Those “house specials?” Well, here are a few of the most common drugs being boiled or baked up in the kitchen and the price you may end up paying: W
dictive and can have life-long or life-ending consequences, but why is it so dangerous to your property? Because meth is produced from a number of highly volatile and toxic chemi- cals, fires and explosions can easily result if the ingredients are handled improperly. A tenant’s lab may not only put their own life in danger but also may endanger neighbors or other pass- ers-by. Unfortunately, the victims’ families may file suit against you, the property owner, and that is just one angle on the risk. A meth lab is also expensive to clean up: $10,000 for “low level” contamination and much more for higher levels. If someone is injured from a fire or explosion during clean up, you may find yourself in a very large lawsuit. Don’t be tempted to DIY this clean up though. The Environmental Protection Agency (EPA)’s “Voluntary Guidelines for Meth- amphetamine Laboratory Cleanup” is 48 pages long! Our tip is to leave meth lab clean-ups to the experts. INSIDER TIP: Beware of scammers, who often use a “special blue light” to test for meth residue. Just having that light does not make your expert legitimate or certified. You may want to have an independent chemical lab verify the existence of meth first and then seek out a specialist to help you with remediation.
METHAMPHETAMINE We know that methamphetamine, or meth, is highly ad-
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