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Leasing to Cannabis-Related Businesses in New York

15 Jan Leasing to Cannabis-Related Businesses in New York

As New York and California cannabis and business attorneys, we provide legal advice to a number of cannabis-related businesses. As a constantly evolving and emerging market, it is crucial that business owners understand the complexity of these laws and how they differ at the local, state, and federal level.  This is especially important for landlords of cannabis-related businesses, and this not only includes marijuana, but also CBD. For example, while New York has decriminalized marijuana, marijuana remains illegal under federal law.

Below, we discuss some important issues you will want to go over with your attorney when it comes to potentially leasing property to cannabis-related businesses in terms of how federal and New York state law applies.

Specific Use Provisions in the Lease

Because cannabis laws are constantly changing, landlords will want to include a specific use provision in the lease in order to ensure that whatever is being sold on their property is legal and the tenant has insurance to cover that use; for example, the sale of CBD oil.

The Fine Print of the Mortgage

Make sure that you consult with an attorney in terms of what the fine print in your mortgage indicates. It is possible that if the property is collateral for a bank mortgage, it will have a clause mandating that its use is in compliance with the law, which includes the federal law. This could make a cannabis-based business a problem for landlords because marijuana is still classified as a Schedule I controlled substance at the federal level, and federal law still considers leasing or renting property for the purpose of using a controlled substance a felony. This could implicate a landlord and trigger a default in terms of the mortgage.

Is The Specific Product Being Sold Legal in That Particular Area?

It is also a good idea to consult an attorney regarding local and state zoning restrictions in order to make sure whatever specific business that is being conducted on your property is in compliance with the law in that particular jurisdiction. For example, while New York State has decriminalized both CBD and marijuana, New York City has a prohibition on all CBD.

Protection Yourself Via a Specific Indemnification Provision

There is no question that given the nature of cannabis-related businesses, leasing to this type of business is riskier than leasing to other businesses in that landlords are much more likely to find themselves named in litigation. As a result, any lease to cannabis-related businesses should contain an indemnification provision that extends beyond that found in a typical lease.

Business With Your Bank

You will also want to do research with your attorney as to what kind of implications leasing to a cannabis-related business might have in terms of business with your bank, as some banks are on high alert when it comes to any cannabis-related transactions due to marijuana’s Schedule I classification.

 Speak With Our New York Cannabis Business Attorneys

It is imperative that anyone who does work with cannabis businesses ensures that what they are doing is in compliance with the law. Contact our attorneys today at (212) 920-5858 or info@heerdeblum.com to schedule a consultation and find out how we can help.