As regulators in California continue work on developing rules and regulations surrounding the Medical Cannabis Regulation and Safety Act (MCRSA), it’s also important that existing marijuana businesses in California begin to take proactive steps to fall into compliance with the new regulatory structure. So far we have covered Seller’s Permits and Operating Procedures. Next up: proposed locations and the legal right to occupy the proposed location.
It’s no secret that in California, many marijuana businesses operate in facilities where the landlord doesn’t know about the nature of the business taking place. In some cases, business owners may obfuscate the nature of their business by indicating that they are focused on wellness, herbs, alternative medicine, or a litany of other business categories. Others utilize shell companies and subleases to mask the true nature of their business. In order to comply with MCRSA, these practices must come to an end.
SB 643 requires that marijuana business applicants “Provide evidence of the legal right to occupy and use the proposed location. For an applicant seeking a cultivator, distributor, manufacturing, or dispensary license, provide a statement from the owner of real property or their agent where the cultivation, distribution, manufacturing, or dispensing commercial medical cannabis activities will occur, as proof to demonstrate the landowner has acknowledged and consented to permit cultivation, distribution, manufacturing, or dispensary activities to be conducted on the property by the tenant applicant.”
It’s important to note that the bill language specifically reads “the owner of real property or their agent.” As such, shell companies or intermediaries will not comply with this requirement. Look no further than Colorado for a similar requirement. The Colorado Marijuana Enforcement Division (MED) regularly checks County Assessor records to determine if the lessor indicated on the lease is actually the rightful landowner. It’s reasonable to expect regulators in California will likely go to similar lengths to ensure compliance with SB 643.
For those business owners whose landlord may not be aware of the nature of the operating business, now may be the time to open a dialogue on the topic. If the landlord isn’t open to renting to a marijuana business, it would be wise to start seeking out a cannabis-friendly landlord (or even consider purchasing property if you have the resources to do so). However, before you go out and purchase a property or lock yourself into a multi-year lease, it’s critical to determine if you’ll qualify for a local license. We’ll cover local licensing in our next post, but for now, take note that both a state and local license are required to operate a marijuana business.
The California marijuana industry will look very different in 2018. We encourage our readers to be proactive about compliance in order to minimize any potential business interruption. Now is the time to get prepared.
Yours in Compliance,