With the uncertainty posed by state-level marijuana legalization in direct conflict with federal drug laws that impose strict penalties on marijuana-related activities, real estate lenders must use caution now more than ever to avoid potential negative consequences resulting from illegal activity occurring at the collateral property.
One of the most powerful tools in the federal government’s law enforcement toolbox is the power to seize private property that is associated with criminal activity, including real estate and any proceeds derived from such property. Unlike criminal forfeiture actions brought by the federal government, which are in personam actions requiring the government to indict the property along with the related criminal defendant, civil forfeitures are in rem actions brought against the property and do not require criminal charges to have been brought against the owner. A civil forfeiture action under 18 U.S. Code §981 is the federal government’s preferred method of seizing property involved in illicit activities because the government need only prove a property’s connection to illegal activity by a preponderance of the evidence (18 U.S. Code §983(c)), whereas a criminal forfeiture actions requires proof beyond a reasonable doubt. Additionally, a successful civil forfeiture action can result in the property being deemed forfeited as of the date the criminal activity occurred (18 U.S. Code §981(f)), which allows the government to capture proceeds that were generated from the property prior to the final adjudication of the proceeding.
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