What Every Real Estate Professional Should Know About Representing a Cannabis Business

Cannabis plant enveloping model homes that resemble Monopoly pieces

On November 8, 2016, proposition 64 was passed by a majority of California voters, making the recreational use of cannabis, by adults over the age of 21 years, legal in the State of California. Proposition 64 followed proposition 215, which had already made the medicinal use of cannabis legal in 1996.

However, the legalization of cannabis for recreational purposes created a surge of entrepreneurs ready to start their own cannabis businesses. Accompanying this surge was a need for professionals in various industries to assist these startups, including lawyers, CPAs, and Real Estate professionals.

Focusing on the real estate professional, the most important thing to know is that the sale of cannabis for recreational or medicinal use is strictly regulated by the State of California and administered through the Bureau of Cannabis Control (BCC).

Most importantly, anyone involved in the retail sale of cannabis must be licensed. It is illegal to simply setup a storefront and start selling cannabis.

The licensing aspect of the sale of cannabis in the State of California is two-tiered. An individual must have a license from the State of California to sell cannabis. However, the State of California will not issue a license until the BCC receives proof that the local jurisdiction (city or unincorporated areas of a county) allows the sale of cannabis. This second tier of the licensing process frustrates individuals, who want to operate in a certain location, but are prevented by local ordinances.  These individuals sometimes ignore the state and/or local law and simply set up their storefront. Real Estate professionals must not be involved with any businesses that is knowingly operating illegally.

Then how can a real estate professional assist a cannabis business? Simple. They must only show locations where it is legal to operate and advise on the required licensing. Unfortunately, the licensing varies across the state of California. For example, on June 6, 2017 the County of Los Angeles adopted ordinance number 2107-0025, which banned the sale of cannabis in any unincorporated area of Los Angeles County. In contrast, the City of Los Angeles has not banned the sale of cannabis within its City limits. Although, the City of Los Angeles does require every cannabis business to obtain a city license through its Department of Cannabis Regulation (DCR).

By being informed about the licensing laws for cannabis sales, Real Estate professionals can better assist their clients and ensure they do not run afoul of the law.

About Tim Burke

Tim is a licensed attorney in California and Nevada. He brings over 19 years of transactional and litigation experience to JohnHart. Prior to joining JohnHart, Tim was in private practice providing legal guidance to clients on Real Estate, financial, corporate, estate planning, and employment matters.

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