Straight Dope: Real Estate and Land Use Issues in the Representation of Medical Marijuana Facilities
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Straight Dope:
Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
July 31, 2015
Brian R. Smith
Michele L. Maresca
ABA Annual MeetingStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
I. Primary Challenge
A. State vs. Federal Law
1. The main challenge is that State law and Federal law are in discord.
II. State Laws Affecting Marijuana Cultivation and
Dispensaries
A. 23 States + the District of Columbia have legalized medical
marijuana, recreational marijuana, or both:
1. Alaska
2. Arizona
3. California
4. Colorado
5. Connecticut
6. Delaware
7. Hawaii
8. Illinois
9. Maine
10. Maryland
11. Massachusetts
12. Michigan
13. Minnesota
14. Montana
15. Nevada
16. New Hampshire
17. New Jersey
18. New Mexico
19. New York
20. Oregon
21. Rhode Island
22. Vermont
23. Washington
24. District of Columbia
B.State Laws: Status of Marijuana Laws (map)
1. An additional five states have laws decriminalizing marijuana:
a. Nebraska
b. Missouri
c. Mississippi
d. North Carolina
e. OhioStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
1
C.18 Total States have Pending or Failed Legislation or Ballot
Measures to Legalize Medical Marijuana
(as of June 12, 2015, per ProCon.org)
1. 1 State with Pending Legislation in 2015:
a. Pennsylvania
2. 17 States with Failed Legislation in 2015:
a. Iowa
b. Alabama
c. Florida
d. Georgia
e. Indiana
f. Kansas
g. Kentucky
h. Mississippi
i. Missouri
j. Nebraska
k. North Carolina
l. North Dakota
m. South Carolina
n. Tennessee
o. Texas
p. Utah
q. West Virginia
D.Oregon’s Qualifying Medical Conditions, and the Number of
Patients Claiming Each
(current as of July 1, 2015; http://tinyurl.com/Oregon-Statistics will be updated again on
Oct. 1, 2015)
(a patient may have more than one diagnosed QMC)
1. Agitation related to Alzheimer’s disease: 86
2. Cachexia: 1,176
3. Cancer: 3,991
4. Glaucoma: 1,098
5. HIV+/AIDS: 732
6. Nausea: 9,913
7. Severe Pain: 67,904
8. Seizures (including, but not limited to, epilepsy): 1,969
9. Persistent muscle spasms (including, but not limited to, those caused by Multiple
Sclerosis): 20,060
E. Connecticut has Eleven “Debilitating Medical Conditions”
(http://tinyurl.com/DCP-qual-req)
1. CancerStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
2
2. Glaucoma
3. Positive status for HIV/AIDS
4. Parkinson’s Disease
5. Multiple Sclerosis
6. Damage to Nervous Tissue of the Spinal Cord with Objective Neurological
Indication of Intractable Spasticity
7. Epilepsy
8. Cachexia
9. Wasting Syndrome
10. Crohn’s Disease
11. PTSD
F. Illinois’ Debilitating Medical Conditions
Illinois has the most extensive list of qualifying conditions.
1. Acquired Immunodeficiency Syndrome (AIDS)
2. Agitation of Alzheimer's disease
3. Amyotrophic Lateral Sclerosis (ALS)
4. Arnold-Chiari malformation and Syringomelia
5. Cachexia/wasting syndrome
6. Cancer
7. Causalgia
8. Chronic Inflammatory Demyelinating Polyneuropathy
9. Crohn's disease
10. CRPS (Complex Regional Pain Syndromes Type II)
11. Dystonia
12. Fibromyalgia (severe)
13. Fibrous dysplasia
14. Glaucoma
15. Hepatitis C
16. Human Immunodeficiency Virus (HIV)
17. Hydrocephalus
18. Interstitial Cystitis
19. Lupus
20. Multiple Sclerosis
21. Muscular dystrophy
22. Myasthenia Gravis
23. Myoclonus
24. Nail-patella syndrome
25. Neurofibromatosis
26. Parkinson's disease
27. Post-concussion syndrome
28. RSD (Complex Regional Pain Syndromes Type I)
29. Residual limb painStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
3
30. Rheumatoid arthritis (RA)
31. Seizures, including those characteristic of epilepsy (Starting January 1, 2015)
32. Sjogren's syndrome
33. Spinal cord disease, including, but not limited to, arachnoiditis, Tarlov cysts,
hydromyelia, syringomyelia
34. Spinal cord injury
35. Spinocerebellar Ataxia (SCA)
36. Tourette’s syndrome
37. Traumatic brain injury (TBI)
G. Unexpected Advocates: Judge Gustin Reichbach (image)
1. New York State Supreme Court Judge diagnosed with pancreatic cancer in late
2008.
2. Wrote an op-ed in favor of medical marijuana legalization, which was published in
the New York Times on May 16, 2012; Judge Reichbach passed away about two
months later, on July 14, 2012.
3. In the article, Judge Reichbach:
a. described his diagnosis, treatment, and symptoms;
b. described the relief given by inhaled marijuana;
c. urged states to “permit the legitimate clinical use of marijuana”
d. (article available at http://tinyurl.com/ReichbachNYT)
4. Quotes excerpted from op-ed:
a. When palliative care is understood as a fundamental human and medical
right, marijuana for medical use should be beyond controversy.
b. It is to help all who have been affected by cancer, and those who will come
after, that I now speak.
c. It is another heartbreaking aporia in the world of cancer that the one drug
that gives relief without deleterious side effects remains classified as a
narcotic with no medicinal value.
d. Because criminalizing an effective medical technique affects the fair
administration of justice, I feel obliged to speak out as both a judge and a
cancer patient suffering with a fatal disease. . . . Medical science has not
yet found a cure, but it is barbaric to deny us access to one substance that
has proved to ameliorate our suffering.
III. Federal Laws Affecting Marijuana Cultivation and
Dispensaries
A. Foundational Congressional Acts
1. Harrison Narcotic Act of 1951
a. Increased mandatory drug sentences
b. This furthered the Act’s original (1914) goal of seeking “to exert control over
the possession and sale of narcotics, specifically cocaine and opiates.”
Gonzales v. Raich, 545 U.S. 1, 10 (2005).Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
4
2. Narcotic Control Act 1956
a. Equated marijuana with heroin for sentencing purposes
3. Controlled Substances Act of 1970 (“CSA”)
a. Enacted as Title II of the Comprehensive Drug Abuse Prevention and
Control Act
b. Developed the five-schedule categorization we know today
c. Classified marijuana as a Schedule I drug
B.Schedule I drugs
1. Characteristics:
a. The drug or other substance has a high potential for abuse
b. The drug or other substance has no currently accepted medical use in
treatment in the United States
c. There is a lack of accepted safety for use of the drug or other substance
under medical supervision.
2. Other Schedule I drugs:
a. Heroin
b. LSD
c. Ecstasy
3. Schedule II drug examples:
a. Cocaine
b. Morphine
c. Oxycodone
IV. U.S. Supreme Court Weighs In
A. Gonzales v. Raich, 545 U.S. 1 (2005)
1. Held that “Congress’ Commerce Clause authority includes the power to prohibit the
local cultivation and use of marijuana in compliance with [state] law.”
2. “The question presented in this case is whether the power vested in Congress by
Article I, § 8, of the Constitution ‘[t]o make all Laws which shall be necessary and
proper for carrying into Execution’ its authority to ‘regulate Commerce with foreign
Nations, and among the several States’ includes the power to prohibit the local
cultivation and use of marijuana in compliance with California law.” 545 U.S. 1, 5
(2005).
3. Respondents were California residents who suffered from a variety of serious
medical conditions and had sought to avail themselves of medical marijuana
pursuant to the terms of the Compassionate Use Act, Cal. Health & Safety Code §
11362.5 (2005). After an investigation, county officials concluded that one
respondent's use of marijuana was entirely lawful under California law;
nevertheless, federal agents seized and destroyed all six of her cannabis plants.
The Court held that the regulation of marijuana under the CSA was squarely within
Congress' commerce power because production of marijuana meant for home
consumption had a substantial effect on supply and demand in the national market.Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
5
Given the enforcement difficulties in distinguishing between marijuana cultivated
locally and marijuana grown elsewhere, 21 U.S.C.S. § 801(5), and concerns about
diversion into illicit channels, the Court had no difficulty concluding that Congress
had a rational basis for believing that failure to regulate the intrastate manufacture
and possession of marijuana would leave a gaping hole in the CSA. Congress was
acting well within its authority of the Commerce Clause, U.S. Const., art. I, § 8.
(Lexis Summary)
V. The Department of Justice
A. Department of Justice (“DOJ”) Guidance Overview
1. Given that:
a. Congress classified marijuana a Schedule I drug and criminalized its use;
and
b. The Supreme Court of the United States found such classification
constitutional,
2. It follows that:
a. DOJ enforcement guidance will call for continued enforcement of federal
law, notwithstanding any contradicting state laws.
3. Or will it?
B.DOJ Enforcement Guidance: A Six-Year Story
1. Memorandum 1: 2009
a. “As a general matter, pursuit of these [Department] priorities should
not focus federal resources in your States on individuals whose
actions are in clear and unambiguous compliance with existing state
laws providing for the medical use of marijuana. . . . Of course, no State
can authorize violations of federal law. . . . This guidance regarding
resource allocation does not ‘legalize’ marijuana or provide a legal
defense to a violation of federal law, nor is it intended to create any
privileges, benefits, or rights, substantive or procedural, enforceable by any
individual, party or witness in any administrative, civil, or criminal matter.
Nor does clear and unambiguous compliance with state law or the
absence of one or all of the above factors create a legal defense to a
violation of the Controlled Substances Act.”
2. Memorandum 2: 2011
a. “Persons who are in the business of cultivating, selling or distributing
marijuana, and those who knowingly facilitate such activities, are in
violation of the Controlled Substances Act, regardless of state law.
Consistent with resource constraints and the discretion you may exercise in
your district, such persons are subject to federal enforcement action,
including potential prosecution. State laws or local ordinances are not a
defense to civil or criminal enforcement of federal law with respect to such
conduct, including enforcement of the CSA. Those who engage inStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
6
transactions involving the proceeds of such activity may also be in violation
of federal money laundering statutes and other federal financial laws.”
3. Memorandum 3: 2013
a. States the DOJ’s Eight Enforcement Priorities, whereby the DOJ focuses
on preventing:
i. the distribution of marijuana to minors;
ii. revenue from the sale of marijuana from going to criminal enterprises,
gangs, and cartels;
iii. the diversion of marijuana from states where it is legal under state law
in some form to other states;
iv. state-authorized marijuana activity from being used as a cover or
pretext for the trafficking of other illegal drugs or other illegal activity;
v. violence and the use of firearms in the cultivation and distribution of
marijuana;
vi. drugged driving and the exacerbation of other adverse public health
consequences associated with marijuana use;
vii. the growing of marijuana on public lands and the attendant public
safety and environmental dangers posed by marijuana production on
public lands; and
viii. marijuana possession or use on federal property.
b. “The Department’s previous memoranda . . . drew a distinction between the
seriously ill and their caregivers, on the one hand, and large-scale, for-
profit commercial enterprises, on the other, and advised that the latter
continued to be appropriate targets for federal enforcement and
prosecution. . . . [P]rosecutors should continue to review marijuana cases
on a case-by-case basis and weigh all available information and
evidence, including, but not limited to, whether the operation is
demonstrably in compliance with a strong and effective state
regulatory system. . . . The primary question in all cases – and in all
jurisdictions – should be whether the conduct at issue implicates one or
more of the [eight] enforcement policies.”
4. Memorandum 4: 2014
a. Reiterates instruction to DOJ attorneys and law enforcement to focus on
eight priorities, and states the original eight priorities.
b. “[I]f a financial institution or individual provides banking services to a
marijuana-related business knowing that the business [implicates any
of the eight priority factors] . . . prosecution for violations of 18 U.S.C.
§§ 1956, 1957, 1960 or the BSA might be appropriate. Similarly, if the
financial institution or individual is willfully blind to such activity by, for
example, failing to conduct appropriate due diligence of the customers’
activities, such prosecution might be appropriate. Conversely, if a financial
institution or individual offers services to a marijuana-relatedStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
7
business whose activities do not implicate any of the eight priority
factors, prosecution for these offenses may not be appropriate.”
VI. Conflicts in Action: Practical examples of the conflict between Federal and State
Laws
A. Federal enforcement in states where medical marijuana has been
legalized
1. Letter to Dispensary Property Owner (dated April 26 , 2013), highlighting:
a. “subject to criminal prosecution and civil enforcement actions”
b. “subject to enhanced penalties”
c. “subject to seizure by and forfeiture to the United States”
d. “regardless of the purported purpose”
2. “Kettle Falls Five”
a. Washington State allows 15 plants per patient
b. Collective gardens are capped at 45 plants total
c. This Washington family of four, growing with a family friend, had 68 plants
in all
d. Their garden was raided by the DEA in Aug. 2012 and by the DEA and
SWAT in Feb. 2013.
B.College Campuses
1. The Federal-State conflict presents risks to medical marijuana patients who attend
or visit public universities.
a. “Medical Marijuana License Is No Shield Against Felony Possession
Charges on University Campuses,” June 5, 2015.
i. Andre Maestas, a then-freshman at Arizona State University, was
prescribed medical marijuana for chronic back pain
ii. Nonetheless, “it’s illegal to bring marijuana of any kind – medical use
or not – onto the campus”
iii. “Maestas faces a possible felony conviction for possession.”
iv. “[I]f he’s found guilty, he could lose his financial aid and possibly be
expelled from the university.”
2. A Private Massachusetts University’s Medical Marijuana Policy
a. “Tufts University Medical Marijuana Policy.”
i. Chapter 369 “An Act for the Humanitarian Medical Use of Marijuana”
allows for the controlled use of medical marijuana in the
Commonwealth of Massachusetts. Although students, staff, and faculty
who legally obtain a medical marijuana “registration card” from the
Massachusetts Department of Public Health are allowed to possess
and consume certain quantities of marijuana, doing so is not
permitted on Tufts University property or at university-sponsored
events (either on or off campus).
C.Military UseStraight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
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1. Army veteran, honorably discharged because of PTSD acquired during two tours.
2. PTSD became highly problematic, until a friend suggested marijuana (in Arkansas,
still illegal) to help with his PTSD symptoms. It worked:
a. “I could actually go to sleep. I didn’t have insomnia. I wasn’t scared to go to
sleep. I could actually lay down and ... get a halfway decent night’s rest.”
3. “Marijuana had saved him. Then, last year, police came to his door. He still has no
idea who tipped them off. They arrested him and confiscated marijuana plants he
says he was growing for his own use. Hunter found himself facing five years in
prison. Prosecutors offered a deal: Plead guilty and accept probation. He refused.
He didn’t want to be branded a criminal and stripped of his civil rights.
4. “But last week, he accepted a new offer. It requires him to pay court costs and
costs of prosecution, amounting to less than $1,000. His record will show not a
conviction, but a withhold of adjudication —essentially, a judicial get-out-of-jail-free
card that leaves his civil rights intact.
5. “One is glad Hunter’s legal travails have come to such a favorable end. But who’s
to say the next person in his position will be as fortunate? More to the point, we
should be appalled this sort of thing is even possible, that a veteran can be
threatened with prison because he used the only effective treatment for a wound
incurred in the service of his country.”
VII. Legal Representation
Given federal status of medical marijuana, how do we represent a medical marijuana
client – whether it be a patient, a cultivator, a dispensary, or a property owner whose
property is occupied by one of these?
A. Rules of Ethics: American Bar Association’s Rules of
Professional Conduct
1. Rule 1.2(d) (“A lawyer shall not counsel a client to engage, or assist a client, in
conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss
the legal consequences of any proposed course of conduct with a client and may
counsel or assist a client to make a good faith effort to determine the validity,
scope, meaning or application of the law.”)
2. Rule 4.1(b) (“In the course of representing a client a lawyer shall not knowingly . . .
fail to disclose a material fact to a third person when disclosure is necessary to
avoid assisting a criminal or fraudulent act by a client, unless disclosure is
prohibited by Rule 1.6.”)
3. Rule 1.6(b)(6) (“A lawyer may reveal information relating to the representation of a
client to the extent the lawyer reasonably believes necessary . . . to comply with
other law or a court order.”)
B.What Can We Do?
1. Article: Connecticut attorney held marijuana belonging to a client’s son – cited for
possession after dropping bag in courtroom.Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
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2. Options for attorneys, to act within practice rules
a. Interpret the law:
i. Statutes
ii. Regulations
iii. Ordinances
b. Indicate possible outcomes that correspond to a range of actions
c. Without making a recommendation contrary to federal law
VIII. Real Estate Concerns: Landlords
A landlord’s concerns fill a range which varies depending on the party to whom the
landlord rents / leases
A. Financial Considerations
1. Impacts on Receipt of Federal Funding
a. United States Department of Housing and Urban Development (“HUD”)
i. Memorandum on Jan. 20, 2011: calling for all public housing
authorities – in states where medical marijuana is legalized – to adopt
policies prohibiting medical marijuana in public housing programs.
2. Impacts on Receipt of Lending, Financing, and Private Funding
a. The related risks discourage lenders:
i. Erosion of collateral property resulting from installation and removal of
customizations (especially for cultivators)
ii. Accepting payments proceeding from [federally] criminal transactions
(especially for cultivators and dispensaries)
(1) Income calculations often exclude actual and anticipated
medical marijuana profits
iii. Insurance, nuisance, and other risks (with patients, cultivators, and
dispensaries)
3. Impacts on Depositing Rental Payments Received
a. Banking Secrecy Act (“BSA”)
i. Requires Suspicious Activity Reports (“SAR”) for transactions and
clients known or suspected to be involved in marijuana-related
businesses – regardless of impact on DOJ enforcement priorities
ii. PATRIOT Act prohibits bank from alerting its client of the SAR filing
b. Anti-Structuring Laws
i. Can trigger SAR: several small deposits, or any transaction involving
over $5,000 in the aggregate
ii. Note: some structured transactions are conducted as such “by
necessity” – such as, when a tenant (e.g., a dispensary) wants to pay
rent using money orders, the maximum amount of a money order’s
value may force the tenant to pay using several smaller money orders;
the landlord must then deal with depositing the several, smaller money
orders.Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
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B.Duties and Responsibilities
1. Accommodations: Generally
a. No duty to allow current tenant to use medical marijuana
b. No duty to rent to medical marijuana patient
c. Patients not protected under ADA, FHAA / FHA
d. Accommodating a patient’s medical marijuana use is not a “reasonable”
accommodation
2. Accommodations: Case Law
a. “The Fair Housing Act, Americans with Disabilities Act, and Rehabilitation
Act all expressly exclude illegal drug use, and [the public housing
authority] did not have a duty to reasonably accommodate [plaintiff-
tenant]’s medical marijuana use. See 42 U.S.C. §§ 3602(h), 12210(a); 29
U.S.C. § 705(20)(C)(i).”
b. “HUD does not mandate that public housing authorities consider the factors
elucidated in its memo prior to terminating a lease based on illegal drug
use.”
c. “Washington law requires only ‘reasonable’ accommodation. See Wash.
Rev. Code § 49.60.222(2)(b). Requiring public housing authorities to
violate federal law would not be reasonable.”
d. Assenberg v. Anacortes Housing Authority, 268 Fed. Appx. 643, 2008 U.S.
App. LEXIS 5434 (9th Cir. Wash. 2008).
3. Accommodations: In Practice
a. What do you do if the tenant asks for a “reasonable accommodation”
to possess and use medical marijuana on the premises?
i. Release from the lease without penalty, or
ii. Accommodate the tenant, but require the tenant to pay the cost of
mitigation (e.g. exhaust fans)
4. Evictions
a. The Court declined to issue a declaration that “the use, possession,
manufacture, sale or distribution of marijuana in violation of the
Controlled Substances Act is cause for [property managers] to evict the
tenants in violation thereof and such conduct is not exempted by the
Michigan Medical Marijuana Act.”
“To do so would . . . go beyond what is necessary to resolve the core
dispute in this case . . . whether the [FHA] requires Plaintiff to reasonable
accommodate Defendant’s use of state-sanctioned medical marijuana. The
state courts have jurisdiction to determine whether, and under what
circumstances, a landlord may evict a tenant for violation of lease
provisions. This Court finds it prudent to leave eviction determinations
to the sound discretion of those state courts.”
b. Forest City Residential Management v. Beasley, 2014 U.S. Dist. LEXIS
167532 (E.D. Mich. Dec. 3, 2014).Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
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5. Lease Provisions
a. Addendums before lease renewal
i. Lease Addendum For Crime-Free/Drug-Free Housing
(1) In consideration of the execution or renewal of a lease of the
dwelling unit identified in the lease, Owner and Resident agree
as follows:
(2) Resident, any members of the resident's household or a guest
or other person under the resident's control shall not engage
in illegal activity, including drug-related illegal activity, on
or near the said premises. "Drug-related illegal activity"
means the illegal manufacture, sale, distribution, purchase, use
or possession with intent to manufacture, sell, distribute, or use
of a controlled substance (as defined in Section 102 or the
Controlled Substance Act [21 U.S.C. 802]) or possession of
drug paraphernalia.
b. Provisions for new and returning tenants
i. Breach Provision
(1) MEDICAL MARIJUANA: The parties agree, that it shall be a
breach of this Lease for Tenant to grow, cultivate or raise
marijuana on or in the property or for Tenant to sell,
dispense or become a dispenser of marijuana, regardless of
whether Tenant has or is licensed to do so and regardless of
whether Tenant has been granted the right to supply or
provide marijuana is a violation of this lease and will subject
Tenant to eviction and or any other remedy available to
Landlord pursuant to this lease. It shall also be a breach of
this Lease for Tenant to use or smoke marijuana on the
property even if Tenant has a prescription for its medical
use or if Tenant is legally registered for such use. Tenant
shall be required to use or smoke medical marijuana off the
premises and a violation of this shall subject Tenant to
eviction and or any other remedy available to Landlord
pursuant to this Lease.
C.Property Concerns
1. Renting to Patients
a. Smoke and odors
i. In multi-tenant buildings
ii. Outdoors
b. Good faith and fair dealing
i. One tenant uses medical marijuana;
ii. Another is disturbed by it;
iii. Which lease will the landlord enforce?Straight Dope: Real Estate and Land Use Issues in the
Representation of Medical Marijuana Facilities
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c. Insurance
i. Indoor air quality
ii. Government seizure
iii. Risk of fire or other property damage
2. Renting to Cultivators
a. Electric Bill
i. Same light levels as an operating rooms
ii. Air exchange rates 6X that of a biotech lab and 60X that of your home
iii. Power needs equal to a data center
iv. California: 3% of all electric use and 8% of household use
b. Water consumption
i. “Cannabis is not a water intensive crop, but indoor cultivation requires
attention to hydration levels, and Cervantes estimates that 16 plants
will require between 10 to 25 gallons of water per week. Assuming
plants are grown for 90-days before harvest, that is equivalent to 8 - 20
gallons of water per plant.”
c. Other byproducts of growing process
i. Mold
ii. Pests
(1) Spider mites
(2) Whiteflies
iii. Odors
d. Insurance
i. Maybe no coverage for mold
ii. Property damage (see below)
iii. Theft
iv. Indoor air quality
v. Government seizure
e. Property Damage from Alterations
i. HVAC installation
ii. Electrical modifications
(1) damage to electrical service entrance form tapping into the
system upstream of the meter (i.e., stealing electricity)
iii. Ductwork
(1) Temporary & permanent
(2) Cutting studs to accommodate ducts
iv. Additional vents (esp. roof vents)
v. Plumbing modifications
(1) Valves added to plumbing supply lines
vi. Staples or brackets on ceilings, walls, floors, around windows – for
privacy and light control
3. Renting to DispensariesStraight Dope: Real Estate and Land Use Issues in the
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a. Insurance
b. Odors
c. Parking, Traffic patterns
d. Crime
i. Sale or theft of patients’ purchase
ii. Theft of store’s cash on hand
D.Miscellaneous Matters
Other concerns to keep in mind as landlords who are or may be involved with
medical marijuana
1. Tenant tenure / turnover
a. Especially given risk of:
i. federal enforcement,
ii. loss of tenants’ (business or residential) financing
2. Abandoned medical marijuana products or paraphernalia
a. Eviction
b. Abandonment
3. Preemption
a. Eviction on basis of federal law violation may be barred if tenant argues:
federal issues are landlord’s problem, tenant’s operation is lawful under
state law, and landlord knew of and consented to marijuana-related use
when parties entered into lease.
b. Include termination provision “allowing termination of the lease, regardless
of any knowledge or acquiescence of the landlord, in the event a lender or
governmental agency notifies the landlord of a default or criminal violation”
and further “allowing termination of a marijuana-related lease on or before a
property sale.”
IX. Real Estate Concerns: Buyers
Considerations to keep in mind when buying property currently occupied by, previously
used by, or in order to rent / lease to medical marijuana patients, cultivators, or
dispensaries.
A. Review declaration of covenants and restrictions
1. No violation of federal law
2. Requirement of “first class” business operations
3. No consumption on premises
B.Home / Property Inspection
1. It is beyond the scope of some inspectors to identify signs of prior marijuana
cultivation or usage
2. Review inspector’s list of exclusions
3. Be clear about your expected scope
X. Real Estate Concerns: TenantsStraight Dope: Real Estate and Land Use Issues in the
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A. What to advise tenant clients
1. Cultivators, dispensaries, and patients alike should consider the aforementioned
actions and their potential consequences when considering
a. The type of business or activity in which to engage,
b. The type of property to occupy, and
c. The type of changes to implement, if any.
2. Benefits should be weighed against risks, at the individual level and at the
community level
XI. Lending / Banking
Special considerations when representing banks, financiers, and other financial entities
A. Familiarize yourself with applicable regulations, statutes, and
laws
1. The Banking Secrecy Act (“BSA”)
a. Types of SARs and their triggers
b. The PATRIOT Act as it relates to BSA
2. Applicable Anti-Structuring Laws
3. Civil Asset Forfeiture Reform Act of 2000 (CAFRA) and similar laws
4. DOJ Memoranda, especially its 2014 memo
5. Financial Crimes Enforcement Network (FinCEN) Memoranda
a. e.g., Feb. 14, 2014: guidance on how to fulfill BSA obligations; indicates
level of scrutiny required
B.Know local practices
1. “[Colorado] regulators conducting loan reviews have fully excluded income from
marijuana-related rents from cash flow calculations, effectively throwing a loan into
immediate covenant default.” Painter at *18.
C.Consider the collateral
1. Potential for deterioration, value loss
2. Downgrading of an asset
3. Impact on bank’s regulatory requirements
4. Owner-borrowers meeting loan-to-value covenants
XII. Zoning
A. Why it matters
“For years, Los Angeles had no additional zoning requirements for medical marijuana
dispensaries. . . . Federal officials admitted that because of the number and
variety of locations, they could not keep up with enforcement. As federal agents
targeted one dispensary, another opened to meet the market demand. In each
instance, local officials continued to control their operations and presence while
collecting taxes on their sales.” Morrison at 87-88.
1. Impact on area’s value
a. Rule of Large NumbersStraight Dope: Real Estate and Land Use Issues in the
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i. Aforementioned collateral deterioration, property damage from
alterations, and resulting value loss – multiplied throughout an area
ii. Federally authorized property seizures
iii. Effects on resale value(s) and price(s)
b. Consider potential cumulative impact on marketability within a
neighborhood, district, town, city
B.Drafting
1. What makes for strong zoning statutes?
a. Clear “Purpose” and “Findings” sections
i. “The experience in the State of California, a state that approved the
medical use of marijuana more than a decade ago, is that
concentrations of marijuana distribution activity lead to the following
significant and serious secondary effects: [include items of concern to
you]”
ii. “Due to the fact that all distribution of marijuana was previously illegal,
it has never been allowed within the provisions of the City’s Zoning
Ordinance. The [legislators/voters] of the State of [ABC] affirmed the
medical use of marijuana. The intent of the [Bill/Proposition/Statute]
was to enable persons who are in need of medical marijuana to be
able to obtain and use it without fear of criminal prosecution. The
specific purposes of this Chapter are to safeguard the urban
environment by permitting compliance with state law in a manner
consistent with neighborhood concerns.”
iii. “Purpose and Intent. It is the purpose of this section of the [Medical
Marijuana Act and Program] by establishing reasonable and uniform
zoning regulations for medical marijuana facilities which, in
combination with licensing requirements contained in the
[City/Town/County Code], will allow qualified patients and primary
caregivers to cultivate marijuana for medical purposes, and at the
same time protect the public health, safety and welfare of
communities, within the [ABC Town/City/County] area and it is the
intent of this section that the regulations be utilized to preserve the
character of neighborhoods and property values and to deter the
spread of crime and prevent problems of blight, deterioration, and
public safety which would often accompany and are brought about by
the operation of medical marijuana facilities.”
b. Clear definitions
i. Medical marijuana dispensary: [includes references to] “in person”
[and] “or from which delivered” (Berkeley)
ii. Medical Marijuana collective (“collective”): An incorporated or
unincorporated association, composed solely of four or more qualified
patients, persons with identification cards, and designated primaryStraight Dope: Real Estate and Land Use Issues in the
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caregivers of qualified patients and persons with identification cards
(collectively referred to as “members”) who associate at a particular
location to collectively or cooperatively cultivate marijuana for medical
purposes, in strict accordance with California Health and Safety Code
Sections 11362.5, et seq. (San Diego County)
iii. Consideration: money, barter, membership, labor or other (Berkeley)
iv. Patient: permitted to cultivate and/or consume (Berkeley)
v. Marijuana: means all parts of the plant Cannabis sativa L., whether
growing or not; the seeds thereof; the resin extracted from any part of
the plant; and every compound, manufacture, salt, derivative, mixture,
or preparation of the plant, its seeds or resin. It does not include the
mature stalks of the plant, fiber produced from the stalks, oil or cake
made from the seeds of the plant, any other compound, manufacture,
salt, derivative, mixture, or preparation of the mature stalks (except the
resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of
the plant which is incapable of germination (Aracata)
2. Sections and provisions to consider including
a. Exclusions
i. For small users: : “where the amount of marijuana at no time exceeds
1.5 times the amount allowed by state law for a single Qualified Patient
. . . only cultivation occurs, and no exchanges of marijuana or
reimbursements for marijuana occur . . .”
ii. For collective facility operated by primary caregiver: “where the amount
of marijuana at no time exceeds the amount allowed for a single
primary caregiver, . . . Only cultivation occurs, and no exchanges of
marijuana or reimbursements for marijuana occur . . . “
b. Use permit
i. Required in all cultivation cases
ii. Cultivation not permitted as a “home occupation” (where relevant)
c. Allowed Districts
i. “Medical Marijuana Dispensaries may be permitted in all Zoning
Districts except the R-1, R1-A, R-2, R2-A, R-3, R-4, R-5 and ES-R
Districts. Medical Marijuana Dispensaries may be permitted in [these]
Zoning Districts if they are located on the premises of a church or other
religious institution which qualifies as such under section 501 of the
Internal Revenue Code and are otherwise in compliance with the
requirements of this Chapter.”
d. Maximums / caps & distribution requirements
i. “The maximum number of collectives in the City shall be capped at 70.
However, there may be fewer than 70 collectives if sufficient locations
do not exist . . . for 70 collectives. To the fullest extent that locations
consistent with . . . this article exist, the 70 collectives shall beStraight Dope: Real Estate and Land Use Issues in the
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proportionally distributed by Community Plan Area, based on each
Community Plan Area’s percentage share of the City’s total
Community Plan Area population, as estimated by the Department of
City Planning as of October 1, 2008 . . .”
e. Floor area restrictions
i. “Permitted Cooperative or Collective. If the Use Permit authorizes
limited, on-site medical marijuana cultivation at the cooperative or
collective, a permitted medical marijuana cooperatives’ or collectives’
on-site cultivation shall not exceed twenty-five (25) percent of the
cooperatives’ or collectives’ total floor area, but in no case greater than
1,500 square feet and not exceed ten feet (10’) in height.”
f. Distance from other uses, examples
i. 300 feet away from K-12 school, or park, measured by most direct
route to property line
ii. 1,000 feet from:
(1) Residential use district
(2) Park, playground, school, church, recreation center, youth
center
(3) Another Collective Facility
(4) Inclusion of treatment, medical, therapy facilities (and the like) 1
3. Conflict with Other Sections: Public Hearings vs. HIPAA
a. “The cardholder's privacy is protected under [state statute] and the federal
Health Insurance Portability and Accountability Act of 1996 (HIPPA).
Notwithstanding the fact that the cardholder, or his or her landlord, brought
the appeal, the Town, in accordance with the existing process,
advertises the appellant's name, address and issue in the local paper.
The appeal process of [state statute] is silent regarding treatment of the
Cardholder's privacy.” Pagliarini.
b. “Deficient in our state statutes is that [they] do[] not address a Zoning Board
of Appeals hearing a medical marijuana matter. The following statutes need
to be amended:
i. “To protect Cardholder's privacy under HIPPA, the zoning appeal
statutes . . . need to exempt Cardholders from the Public Notice
Requirements.
ii. “The . . . Access to Public Information Act . . . , should exempt all
local permits and appeal documents related to a Cardholder.
iii. “The Open Meetings Act . . . should be amended to exclude
Cardholder related appeals . . . . Zoning appeals should be exempt
from public session and all appeals regarding matters related to
medical marijuana should be in closed session.”
1
This is new, based on article re treatment facility for marijuana addiction, concerned about having a
medical marijuana dispensary as new neighbor.Straight Dope: Real Estate and Land Use Issues in the
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4. Local ordinance preemption by state statute
a. Courts found no preemption where:
i. State statutes
(1) “exempt certain medical marijuana activities . . . from the
sanctions otherwise imposed by particular state antimarijuana
laws,”
(2) create a particular right relating to medical marijuana patients
and their primary caregivers, and
(3) generally “recognize[] the authority of cities and counties to
make and enforce . . . [local] ordinances and regulations not in
conflict with general laws”
ii. Local ordinance
(1) “amounts to a total ban on such facilities within a local
jurisdiction’s borders”
iii. in City of Riverside v. Inland Empire, 56 Cal. 4th 729 (2013).
b. Courts found preemption where:
i. State statutes
(1) “provide[] that registered qualifying patients ‘shall not be
subject to arrest, prosecution, or penalty in any manner . . . for
the medical use of marijuana in accordance with [state
statute]’”
ii. Local ordinance
(1) “prohibits and penalizes such conduct”
(2) Even when it does so “by . . . incorporation of the CSA’s federal
prohibition of marijuana”
iii. in Beek v. City of Wyoming, 495 Mich. 1 (2014).
c. To avoid preemption by state, local zoning ordinances should:
i. Avoid direct conflict with state statutory scheme
ii. Be aware of rights created by state statute
d. To avoid preemption by state, local zoning ordinances should not:
i. Permit conduct which state prohibits
ii. Prohibit conduct which state permits
iii. Penalize conduct which state exempts from penalty
e. Consider / ask:
i. What rights does state law create?
ii. What conduct does state law exempt from penalty?
iii. Does state law permit certain conduct?
iv. Does state law prevent certain forms of abatement?
v. Does state constitution expressly or impliedly limit local jurisdiction’s
authority (e.g., to regulate use of its land)?
vi. Does state statute “occupy[] the field of regulation which the
municipality seeks to enter, to the exclusion of [local] ordinance, evenStraight Dope: Real Estate and Land Use Issues in the
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where there is no direct conflict between the two schemes of
regulation”?
Beek v. City of Wyoming, 495 Mich. 19-20.
XIII. The Future of Medical Marijuana
Practically put, legal pot businesses are too small, too diffuse, and too difficult to deal
with to justify spending much goodwill on Capitol Hill to solve the supremacy problem.You can also read
