Leasing to a marijuana business can be a lucrative endeavor, but it still presents a greater risk to a property owner than a lease to another type of commercial venture. Marijuana is still illegal under the Controlled Substances Act, and the federal government has been known to seize property if it is being used for growing, cultivating, and distributing cannabis and cannabis products. There is also a remote possibility of the landlord being arrested.
Under the Rohrabacher-Farr Amendment, the Department of Justice is prohibited from using federal funds to prosecute medical marijuana businesses in states where marijuana is legal. However, it does not address asset forfeitures in cases involving recreational marijuana, available for adult use in California since January 1, 2018. In addition, in light of Attorney General Jeff Sessions’ recent rescission of the Cole Memo and his efforts last May to get members of Congress to undo the protections of Rohrabacher-Farr, both landlords and tenants must be prepared for the possibility of increased federal interference.
Federal asset forfeiture
Any real property used to facilitate federal crimes – even if the activity is legal in the state – may be subject to civil asset forfeiture. The federal government doesn’t even need to prove the landlord’s guilt, only that there is a substantial connection between the property and the crime. For these reasons, and due to evolving state cannabis policies, commercial leasing agreements with marijuana-related businesses warrant far more than standard, boilerplate language.
Among other things, commercial leases with marijuana businesses must specifically address and provide a strict code of conduct for the property’s intended use, and should include other provisions that distance the landlord from the tenant’s marijuana business activities.
Commercial lease agreements for and with marijuana enterprises
Landlords and marijuana businesses must be wary of leases that would invite federal scrutiny. The real estate attorneys in Moskowitz, LLP’s Cannabis Practice Group routinely handle commercial lease agreements specifically designed for and with cannabusinesses. We can work with you to install safeguards in your commercial lease that will minimize the risk to your business or property.
Disclaimer: Growing, cultivating and distributing marijuana are violations of federal law under the Controlled Substances Act, Title 21, Section 841(a)(1). The tax firm of Moskowitz, LLP can assist you in adhering to state and local law and regulations, and advise you how to conduct your operations in a way that will minimize your risk of federal prosecution. However, we do not intend for our advice to assist you in the violation of any law and in light of the evolving nature of the marijuana industry in the U.S., clients must understand that our legal and tax services can guarantee neither success nor immunity from civil and/or criminal prosecution. In all areas where the legal landscape is constantly changing, we recommend that our clients act with caution, stay abreast of developments in the industry, and consult with us often.