Options? tenant legally cultivating marijuana

[Wendy Li]

Our property is in MI but we live in CA so it's hard to keep track of the tenant.  We recently visited and discovered that they have been cultivating marijuana in the basement.  They were growing and dispensing marijuana before the start of their lease and yet did not notify us.  Without a lawyer's perusal, we can tell that what they're doing is registered and legal.  So now we're faced with two unappealing choices and would like the advice of those who might have been in similar positions.

1. Sell them the house

They want to the property as is. However the house is currently below the value at which we bought it and we would be losing ~50k if we sold at the current estimated prices, not including Realtor fees and the additions we made to the property( adding in AC, deck, lawn, sprinklers).  The house will be difficult to sell to anyone else because we will need to notify any potential buyers that the property was a grow house.  

2. Evict or wait out the lease agreement and search for a new renter

She has been renting with us for more than 3 years and continuously growing since then.  The additions she has made to the property without our approval alone is cause for eviction.  Either that, or more likely, we will wait out our lease agreement and refuse to renew (one month remaining). We will have to spend a significant amount of money repairing damages done and it will be significantly more difficult to find a renter if we have to disclose that the house was used as a grow-op.  

Is there anything we can do to reduce our losses?  Any opinions or advice on these options?  Any other options you could suggest.  We will not be allowing her to renew the lease for obvious reasons.  

For anyone who has faced a similar situation.  How did you handle it?  Does anyone have advice and suggestions that they could offer?  

[Jason Hirko]

@Wendy Li I would try to monetize the amount of the value she has 'cost you' because of the requirement to disclose it as a grow house (and all check to make sure that disclosure also applies to legal operations), and tell her to pay it to you in the form of increased rent.