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The city quietly passed an ordinance in December that says property owners only have to pay a fine if they knew, or reasonably should have known, that cannabis was being grown on the property. The penalty took effect last week.

City Attorney Susana Alcala Wood says the change codifies the ongoing practices of her office. She says the city has eliminated penalties if a landlord presents evidence they had no knowledge of a tenant’s illegal activities, and that the home is a legitimate rental.

“There are absolutely instances where a property owner may not know about what’s going on on their property,” she said.

But attorneys for property owners argue the modified ordinance represents a significant shift in the city’s aggressive enforcement approach. They say the city has regularly pursued fines against landlords who acted responsibly and had no knowledge of a tenant’s illegal cultivation.

From August 2017 to August 2019, the city issued over 400 fines totaling upward of $90 million.

The city has collected less than $6 million, however, because more than 80 percent of those fines have been challenged through the city’s appeal process. The city also faces dozens of legal actions in court from landlords who claim innocence.

Scott Radcliffe, an attorney who represents several property owners, says the change is an acknowledgment by the city that it overstepped its authority.

“They’ve been caught red-handed for doing something that is not going to uphold legally,” he said. “And this is their mea culpa.”

City’s Cannabis Enforcement Law Evolves

In August 2017, Sacramento adopted an ordinance allowing residents to grow a maximum of six cannabis plants in their homes, with a $500 fine for each plant over the limit. That has resulted in fines typically ranging between $100,000 to $500,000 for an individual landlord. Some fines have exceeded $1 million.

The city based its penalty on the estimated street value of cannabis that could be harvested from a single plant. City staff justified the steep fines as a way to minimize crime — including violent incidents — associated with illegal grows.

The following April, the city amended the statute, prohibiting anyone from owning or renting a property where cannabis is “knowingly or unknowingly” being cultivated. City Council members did not discuss the new enforcement language at the meeting.

Attorneys for property owners agree that illegal cannabis cultivation is a problem in Sacramento and should be addressed. They also say property owners involved in the growing should face some punishment. But they argue the city’s enforcement approach has victimized rental property owners who acted in good faith.

They say the city has heavily relied on the “knowing or unknowing” ordinance to uphold fines.

At city appeal hearings, where property owners challenge the fines, the statute appears in presentations given by attorneys for the city — sometimes with “knowingly or unknowingly” underlined.

Attorneys for the city also emphasize the point during their oral arguments.

At a hearing in May, for example, a property owner named Zuhu Wang challenged a $137,500 penalty. He claimed his tenant operated a large indoor cannabis grow without his knowledge.

Deputy city attorney Melissa Bickel dismissed this argument. What mattered, she said, was that Wang owned and leased the property where illegal cultivation occurred.

“Whether that was done so knowingly or unknowingly makes no difference to the factual determination today,” she said.

The following month, deputy city attorney Emilio Camacho used the same justification to argue that a $223,500 penalty should be upheld.

“Knowledge of the illegal cannabis cultivation operation is not required,” he said.

Clearing Fines For Innocent Owners

The city’s updated ordinance, which went into effect on January 9, prevents city attorneys from using this argument to uphold penalties.

It says a property owner is subject to fines if he or she “knows or, by exercising reasonable care or diligence, should know that cannabis is being cultivated.”

The proposal appeared on the City Council’s calendar at the December 10 hearing. Council members did not discuss the item before passing it.

Councilmembers Jay Schenirer and Eric Guerra, who have been vocal proponents of Sacramento’s illegal cultivation enforcement efforts, did not respond to requests to discuss the change.

Mayor Darrell Steinberg, who has declined multiple requests for an interview about Sacramento’s cultivation enforcement program, provided an emailed statement.

“Our enforcement policy has had a laudatory effect on the number of illegal marijuana grows in this city, reducing them by an estimated 80 percent and so removing a major health and safety threat from our neighborhoods,” he said in the statement. “At the same time, it’s appropriate that we revisit our codes to account for people who despite exercising reasonable care and diligence are misled by tenants.”

The staff report supporting the ordinance change provides examples of landlords the city wants to avoid fining, including active military members and “unsophisticated property owners [with] language barriers.”

A pending lawsuit in Sacramento County Superior Court claims the enforcement program is discriminatory. It alleges Sacramento has issued 80 to 90 percent of the fines against Asian-American property owners — or owners the city perceives to be Asian-American. By comparison, Asian-Americans represent about 17 percent of the city’s general population, according to the suit.

If a landlord who receives a penalty claims they’re innocent, Wood says her office invites them in to tell their side of the story.

“We would ask the property owners as they are contesting it to come in and show us proof … they had no knowledge” of the illegal cultivation, she said. “If the information was satisfactory and held up under scrutiny, that would be the time that [we] would reduce it.”

It’s hard to say how many fines the city has cleared following these meetings. Through public records requests, CapRadio obtained 51 settlements the city entered into as of January 2019. The city settled five of those cases for zero dollars.

Public records requests seeking updated settlement documents and records of penalties reduced to zero were supposed to be fulfilled by mid-December; the city recently delayed production of those records until March.

Through August 2019, according to court documents obtained by CapRadio, the city issued more than $90 million in fines and settled $2.1 million worth of cases for zero dollars.

CapRadio has spoken to over a dozen attorneys representing property owners. They say the city’s process of meeting with property owners fails to identify many innocent landlords.

They say the city is more likely to offer a settlement, typically between $30,000 to $70,000, and sometimes upward of $100,000. Attorneys say that amount can wipe out the equity in someone’s house and potentially still leave them in debt — an unacceptable outcome, they argue, for an innocent property owner.

If the property owner does not take the city’s settlement and appeals the fine, the city will pursue the full penalty at an appeal hearing.

The city faces more than 50 legal actions from property owners, almost all of them landlords claiming innocence. In the one case that reached a ruling, the judge threw out the penalty after finding Sacramento violated the property owner’s rights and relied on flimsy evidence to pursue the fine.

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