Denver court case to decide if pot farm hurts neighbor's real estate values

A Denver court will decide if a next-door marijuana cultivation and processing facility injures real estate values. A suit was brought by ranch owners near Pueblo, Colo., who argue that a facility, licensed by the state but in violation of federal law, has depressed the value of their ranch. File Photo by Iriana Shiyan/Shutterstock.

By Ed Adamczyk, UPI

A court case over whether a next-door marijuana farm devalues a neighbor's property begins on Monday in a Denver federal court.

An appeals court ruled in 2017 that a lawsuit by ranchers and landowners Hope and Michael Reilly can continue against Parker Weston, operator of a state-licensed marijuana grower near Pueblo, Colo.

Although recreational marijuana cultivation and use is legal in Colorado, it still violates federal law, and the lawsuit is based on the federal Racketeer Influenced and Corrupt Organizations Act. The RICO Act, typically used to by federal prosecutors to bring mob bosses to justice, allows civil lawsuits against criminal enterprises for property damages.

The Reilly's suit says their property values have declined largely because of the aroma coming from their neighbor's business. It indicates that the marijuana industry could face the same issues the pork-producing industry has faced for years. More importantly, if the suit is successful it could serve as a template for dismantling Colorado's marijuana industry by singling out businesses for harming neighbor's property and then suing them.

The suit contends that the smell of marijuana processing, growing plants blocking mountain vistas and the connection to a federally illegal activity all reduce the value of the Reilly's ranch.

"If they [the Reillys] win a jury verdict and win a big judgment, that would be big news," said law professor and marijuana law expert Robert Mikos. "Then you have even more incentive to look out there for potential plaintiffs to sue these big companies."

A 2015 ruling in the suit by the 10th U. S. Circuit Court of Appeals allowed the RICO claim to go forward while rejecting the argument that Colorado violated federal law in legalizing and regulating its marijuana business.

Matthew Buck, Walton's attorney countered that the smell involved in processing marijuana is not vented to the outdoors, so no odor can be detected. Buck added that the Reilly's home is not immediately adjacent to the processing facility, and that "Our contention is that marijuana is good for business. Everything says that the plaintiff's property value has gone up."

Mikos said that not every property owner can prove that a next-door marijuana facility is harmful to real estate values. The Circuit Court, in its ruling, noted that "We are not suggesting that every private citizen purportedly aggrieved by another person, a group, or an enterprise that is manufacturing, distributing, selling, or using marijuana may pursue a claim under RICO."

Still, the court case is being closely watched by the growing marijuana industry. RICO laws call for defendants who lose cases to pay for plaintiffs' legal costs, which, Buck said in regard to the Reilly's case, could be millions of dollars.