Arizona is now considered one of roughly 30 states which have legalized marijuana in some kind. The expansion and sale of marijuana within the Grand Canyon State exhibits no indicators of slowing down, and lots of industrial landlords, together with their tenants, are cashing in. Certainly, landlords have realized that leasing to dispensaries will be financially rewarding as they typically can cost greater rents. The legalization of marijuana additionally has allowed landlords to fill industrial house that was beforehand tough to lease. So why don’t extra industrial landlords signal leases with dispensaries or manufacturing amenities? And, if there are dangers related to leasing house to a marijuana-related enterprise, what will be completed to attenuate them?
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Whereas the sale of marijuana is permitted below state regulation, the sale and distribution of marijuana violates federal regulation. Particularly, since 1970, marijuana has been an unlawful Schedule I substance below the Managed Substances Act. The Act permits the federal authorities to grab any property that’s used for cultivating, manufacturing and/or promoting marijuana and to prosecute each landlords and tenants. State legal guidelines that contradict or are inconsistent with the Act, akin to Arizona’s marijuana legal guidelines, don’t present a protection because of the Supremacy Clause within the U.S. Structure (the Structure and federal legal guidelines take precedence over any conflicting guidelines of state regulation). Consequently, except the federal authorities adjustments or amends the Act, the marijuana enterprise stays a dangerous one.
Most landlords leasing to marijuana companies already know that they should acquire the consent of their lenders. Additionally they know that their leases want to incorporate an early termination provision that enables the owner to terminate the lease if there are any federal or state prosecutions of the enterprise house owners; a clause that requires the tenant to indemnify the owner for harm completed to the constructing, the frequent areas or different tenants’ house on account of burglaries, water intrusion points or nuisance claims; and a private lease assure within the occasion the tenant itself is pressured out of enterprise.
As a way to take away a number of the dangers related to leasing industrial house to a marijuana associated enterprise, landlords must also take into account the next:
Articulating what constitutes an occasion of default below the lease. Most industrial leases usually handle occasions of default, such because the nonpayment of hire or failure to stay open, however a marijuana lease ought to particularly determine extra occasions of default. For instance, a landlord might want to take into account together with a federal or state enforcement motion filed towards the tenant or any of its principals, and/or if a marijuana license is revoked or not renewed.
Landlord’s disclaimer of curiosity within the tenant’s product. In lots of leases, one of many landlord’s commonplace treatments is the fitting to maintain and/or promote sure stock, tools or private property if the tenant is in default. In a marijuana-related lease, a landlord ought to embody a provision that every one marijuana and merchandise are owned by the tenant and the owner disclaims any curiosity in such gadgets.
One man’s trash is one other’s treasure. Landlords ought to take into account requiring that tenants have a personal trash disposal settlement. Dumpster diving for marijuana and/or tools has elevated round dispensaries and manufacturing amenities. This can lead to accidents and expose landlords to private harm claims.
It’s crucial that industrial landlords take into account the impression of federal, state and native legal guidelines regulating the use, manufacturing and sale of marijuana. The ideas outlined above characterize only a handful of the problems landlords face when leasing to marijuana companies. Quite a few extra provisions ought to be addressed and negotiated to attenuate the owner’s threat.
Patrick MacQueen in an legal professional and founding companion of MacQueen & Gottlieb. In case you have query, you’ll be able to contact him at [email protected], or name 602-533-2840.