Crimson Galeria Limited Partnership et al (the Plaintiffs) vs. Healthy Pharms, Inc. et al (the Defendants), in Civil Action No. 1:17-cv-11696-ADB (the Complaint), which is currently pending in the United States District Court for the District of Massachusetts, is an interesting case to watch, as it could have far-reaching implications for the cannabis industry. In it, Plaintiffs allege that all Defendants are criminally conspiring to grow and sell cannabis and cannabis products, in violation of the Controlled Substances Act and the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. This is a stretch, as one of the defendants, Century Bank and Trust Company, only provides banking services to Healthy Pharms, Inc., a Massachusetts-licensed registered marijuana dispensary located in Harvard Square. Not to put too fine a point on the dispute, but by invoking the RICO statute, Plaintiffs are attempting to make a federal case out of what amounts to a Harvard Square landlord dispute, because the landlord does not approve of Healthy Pharms, Inc.’s operation and is concerned about the potentially negative ramifications it may have on its own business and real estate value.
On December 15, 2017, Century Bank filed a brief in support of its motion to … Keep reading
I recently attended the New England Real Estate Journal’s “Cannabis: The Next Phase in Commercial Real Estate” summit, which brought together a number of local players for networking and a high-level discussion of where the industry stands in Massachusetts. In addition to being fantastic networking opportunities, events such as this allow attendees to get a sense of where the conversation on cannabis is heading, and for us, can be invaluable in terms of helping to anticipate concerns that clients will have and issues they’ll face.
Some of my takeaways:
- Despite the Attorney General’s stance on marijuana, nothing has really changed. For now, the federal government seems content leaving it to state and local authorities to ensure that cannabis industry players adhere to state laws when establishing and operating their businesses.
- When it comes to launching a cannabis business of any kind, it’s critically important to educate people about what your operation will entail, and what it won’t. You need to meet with municipal boards, with community groups, with public safety officials, to really drive home the message that: “Yes, we’re in the cannabis business, but we’re not the big, bad wolf. We’re just a dispensary, or a
… Keep reading
In my previous post, I outlined some of the challenges property owners face with regard to leasing real estate to registered marijuana dispensaries (RMDs) and cannabis cultivation centers (MJ Tenants). For all parties involved, the path to success in the cannabis space begins with an understanding of the differences between applicable state and federal laws. With respect to leasing to businesses that actually touch the flower, there are significant zoning and locational restrictions imposed on RMDs and MJ Tenants that must be taken into consideration.
Additionally, factors like financing, security, and liability are also strong concerns for all stakeholders – protecting the property, as well as the business, is critically important.
3. The cost of financing
Many, if not most, federally regulated lenders do not, or will not, make loans to entities involved in cultivating or dispensing cannabis. Indeed, very few banks will even allow a dispensary to open a simple operating account. Banks remain concerned about the federal prohibitions against the use and sale of cannabis, and because most are either federally chartered or federally insured (or both), their unwillingness to lend to such businesses is expected to continue until marijuana is legalized at the federal level.
As … Keep reading
Recently, I’ve been asked to negotiate several commercial leases for cannabis cultivation centers (MJ Tenants) and registered marijuana dispensaries (RMDs) around Massachusetts. Competition is fierce, and parties are scrambling to scoop up real estate in qualifying zoned areas. As a result, the market value of these properties is increasing rapidly.
While high costs pose an entry challenge for new businesses, many commercial landlords are benefitting from the sudden increases in value. But despite their expanding profit margins, there remains a host of issues for commercial property owners to consider when leasing to operators of RMDs and MJ Tenants, which sometimes contribute to the increased rents/costs that many of the latter are experiencing.
1. Differences between state and federal laws regarding the growth and cultivation of cannabis
State and federal laws are vastly different concerning the cultivation and sale of cannabis, regardless whether for medicinal or recreational use. The Controlled Substances Act (CSA) classifies cannabis as a controlled substance; as such, cultivating and dispensing marijuana remains illegal at the federal level.
Property owners that derive income from tenants who use a space to cultivate or sell cannabis may expose themselves to prosecution under federal laws. It is a violation of … Keep reading