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Commercial Leasing Law & StrategyCorporate GovernanceFeaturesLJN NewslettersRegulationUnited States Supreme CourtWhite Collar Crime

A Broadening Consensus to Narrow Asset Forfeiture

By Edmund W. Searby

Editor's note: In July 2012, the federal government moved to seize commercially leased property located in San Jose, CA, because it was being used by a medical-€“marijuana-producing tenant operating in compliance with California law. The federal government did not recognize as valid California's authorization of medical marijuana sales, as it still has on the books its own legislation listing marijuana as a schedule-I drug — the most dangerous kind. The Government brought a civil in-rem forfeiture action pursuant to 21 U.S.C. § 881(a)(7), which authorizes the Government, in the case of property that is being used to violate the federal Controlled Substances Act, to seize such “real property, including any right, title, and interest (including any leasehold interest) in the whole of any lot or tract of land and any appurtenances or improvements, which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this subchapter punishable by more than one year's imprisonment.”

After several years of litigation involving multiple parties —€” the U.S. Government, the landlord, the tenant and the City of Oakland —€” the Government dropped the case. But the well-publicized case illustrated an alarming risk for commercial property owners: In certain circumstances, if a tenant uses leased property in furtherance of a crime, the property itself may become subject to civil forfeiture, even before a conviction for the alleged crime has been obtained, and even if the landlord was not involved in the crime. An innocent owner can defend against the forfeiture, but to do so it must show by a preponderance of the evidence that it did not know of the unlawful conduct giving rise to the forfeiture action or, upon learning of the conduct, did all that it reasonably could to terminate the unlawful use of the property. 18 U.S.C § 983(d).

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