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A Guide to Leasing to California Cannabis Tenants

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Leasing to California Cannabis Tenants

Leasing commercial real estate to a cannabis business in California can be a great opportunity for the right lessor, but it comes with significant risks. It’s important for lessors to understand these risks before entering into a lease with a cannabis business. This guide examines various questions our cannabis landlord clients frequently ask my law firm’s attorneys regarding leasing California properties to cannabis businesses.

1. What Risks Do I Face as a Commercial Landlord If I Decide to Rent to a Cannabis Tenant?

One of the most significant issues lessors must understand is that cannabis is still illegal. While California permits cannabis sales, cannabis remains a schedule I controlled substance under federal law, meaning the US treats it the same way as heroin. And while cannabis may soon be rescheduled to schedule III, that won’t make it federally legal.

This discrepancy exposes lessors to potential legal repercussions, from potential civil asset forfeiture to automatic and in some cases incurable defaults under mortgage contracts. While these risks cannot be completely eliminated, there are some risk-mitigation strategies that sophisticated cannabis lessors routinely use, including:

Insisting on Strict Compliance with State Regulations: Lessors can reduce a huge amount of legal risks by ensuring that tenants adhere to all state and local cannabis laws, including by obtaining necessary licenses and permits. Some lessors opt to undertake regular audits or inspections, although many lessors don’t know what to look for any don’t want to be involved on a regular basis – which is where a good cannabis attorney can be immensely beneficial.

Including Provisions for Lease Termination: Good leases always enumerate ways for the lessor to terminate the lease. Many of these “standard” termination provisions fail to address cannabis-specific risks. A good cannabis lease will include cannabis-specific termination provisions, such as by allowing early termination if a tenant engages in cannabis activity before a permit is awarded, if there are significant changes in federal law, or if enforcement actions occur.

Addressing Potential Risks in the Lease Agreement: A good cannabis lease will also address risks specific to cannabis leasing, including zoning regulations, compliance requirements, and so one. I address many of these issues later in this post.

2. My Prospective Tenant Says She Needs a Signed Lease Before She Can Obtain a Permit to Operate, But I Don’t Want Her to Move In Without a Permit. How Can I Protect Myself?

Obtaining a cannabis business permit often requires a signed lease, creating a dilemma for landlords. But, it is not insurmountable. Here are some common strategies we see cannabis lessors take:

Requiring permits before lease effectiveness: Lessors often mitigate these risks by prohibiting their tenant from operating prior to obtaining a permit. In some cases, a lease will be signed effective as of date X but not have a “commencement date” until the tenant is permitted. This will ensure that a tenant doesn’t have a right to use or in some cases even fully access the premises, even with a signed lease.

Incentivizing speedy licensing: Cannabis tenants often ask for reduced rent while seeking licensure, or for having an early termination right if they are unable to secure licensure within a specific time frame. In these cases, it’s in the lessor’s best interest to ensure that the tenant aggressively pursues licensure. So, a smart lessor will negotiate clear time frames. These lessors will also require the tenant to provide regular updates on permit applications — especially important if the lessor has rent-reduction provisions — so that they can make sure that the tenant is actually doing what it is supposed to be doing.

Clarifying Termination Rights: Tenant timing obligations and milestones are great, but if there is no penalty for failing to meet the milestones, they are effectively optional. Good leases will permit the lessor to terminate should the tenant fail to timely get permitted or achieve other permit-related milestones on time.

3. Will the Mortgage on My Building Be Affected By My Having a Cannabis Tenant?

Most commercial mortgage agreements include clauses restricting property use that violates federal law. Since cannabis remains illegal federally, this means that the lessor can automatically find themselves in default under their mortgage agreement. To address this, cannabis landlords often:

Review Mortgage Agreements Carefully: One of the first things a good cannabis attorney will recommend to a lessor is to review their mortgage documents for clauses prohibiting cannabis activities. Many cannabis lessors have absolutely no idea that these prohibitions exist and without proper consideration can really shoot themselves in the foot.

Consult Lender: If a mortgage contract contains anti-cannabis language, lessors often contact their lender to seek consent. Some lenders will consent, but many will not. If a lender won’t consent, and the lessor can’t pay off the loan or refinance immediately, the lease probably won’t work. We’ve seen plenty of cases where both parties invest time and money into lease negotiations only for the lessor to pull out at the last second after the lender says “no” to a cannabis tenant. Nobody wants to be in that position.

Explore Cannabis-Friendly Financing: If a lender won’t consent and a lessor doesn’t have cash to pay off the loan, the lessor may explore refinancing. Given that interest rates are high at the moment, and that financing options are pretty limited when it comes to cannabis businesses, this may not be a viable option for all lessors.

4. My Property Insurance Premiums Are Going to Increase Due to Cannabis Risks. Should I Pass This Cost Onto the Tenant?

Leasing to a cannabis tenant can lead to increased property insurance premiums due to the higher risk associated with cannabis operations. And, some insurers refuse to over coverage to cannabis-related ventures,. Here too, lessors available options:

Seeking Cannabis-Friendly Insurance: The first thing lessors must do is to see whether leasing to a cannabis business is likely to lead to coverage issues under their current policies. If so, there are plenty of brokers who specialize in procuring policies for cannabis-adjacent businesses like lessors.

Passing Costs Onto the Tenant: Many cannabis leases are structured as triple net, or (NNN) leases. In NNN leases, landlords pass their insurance, tax, and other costs on to their tenant. That way, even if the tenant’s use of the property leads to a policy increase, the tenant will be financially responsible for the increase.

Mandating that the Tenant Maintain Insurance: Any good lease will specify the types and amounts of insurance coverage required from the tenant. These policies commonly include things like general liability, property insurance, and additional coverage as needed. As with other provisions mentioned above, insurance provisions often need adjustment for cannabis-specific uses.

5. Is It a Problem if My Cannabis Tenant Wants to Sublease to Other Operators?

California and local regulations limit subleasing for licensed cannabis businesses. This means that once a tenant gets a license, the property cannot be further sublicensed. There are situations where one party leases a particular property with the intention of subleasing it to an operator, in which case, a sublease may be available. However, it’s important for lessors to understand what their tenant wants to do.

It’s also important to note that a good lease’s assignment provisions (which often go hand-in-hand with sublease provisions) usually consider a change in equity holders of the tenant to be an assignment that requires the lessor’s prior written approval.

With that in mind, lessors often mitigate assignment and sublease-related issues by clearly define approval requirements, notice periods, and conditions for subleasing and assignment, specifically as related to changes of ownership of the tenant, and by vetting any proposed sublessee to better ensure timely payment and compliance under their lease.

6. Zoning and Local Regulations

Understanding zoning laws and local regulations is crucial when leasing to cannabis businesses. Non-compliance can result in fines, operational shutdowns, or other legal issues, which in turn can affect the lessor. Lessors don’t want to be in a position where the tenant blames the lessor for misrepresentation of a zoning-type issue affecting the property. Lessors should at least have a minimal understanding of what local zoning regulations affect the property, and whether the property is in the right zone for the desired cannabis use. A good lessor is usually careful to disclaim any zoning-type of representations in their lease agreement.

7. What Should Go Into My Cannabis Lease?

A well-crafted lease agreement is essential for protecting the landlord’s interests in a cannabis tenancy. Some of the provisions we usually see in cannabis leases include:

Permitted Use Provision: These provisions outline the specific activities allowed on the property and disclaim everything else. A tenant who engages in non-permitted uses will be in default and the lessor can take action against them.

Odor Control Provision: These provisions impose requirements for odor control, such as ventilation systems and air filtration, to minimize disturbances to neighboring properties. This is a good way that the lessor can protect against things like nuisance litigation from neighbors – something that we have seen happen again and again, especially as it relates to cultivation.

Security Requirements: Cannabis businesses are often the targets of crimes. No lessor wants property damage, vandalism, or theft. So a good lease will include provisions for security measures, such as surveillance systems, alarm systems, and access controls, to enhance property security and prevent damage, vandalism, or theft.

Insurance Requirements and Termination Provisions: As mentioned, a good cannabis lease will specify the types and minimum amounts of insurance coverage required from the tenant, as well as the circumstances under which a lessor can terminate the lease.

8. Should I Use an Attorney Experienced with California Cannabis Leases?

Absolutely. Given the complex legal landscape surrounding cannabis, consulting with an attorney experienced in California cannabis leases will almost certainly save money and reduce risks.

An attorney experienced with California cannabis leases can provide tailored advice, draft comprehensive lease agreements, and protect the lessor’s interests in case of legal challenges. They understand the nuances of cannabis regulations, potential liabilities, and can help lessors navigate the complexities of leasing real estate to a cannabis business.



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Federal Cannabis Roundup: Nixon, DEA, Tobacco-Hemp . . . and the DOOBIE Act (*sigh*)

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Last week, I wrote a round-up post on Oregon cannabis. This week, I thought I’d drop a line on the federal happenings. Which are quite a few.

The Nixon tapes

This was a fun piece of news, unearthed by Minnesota cannabis lobbyist Kurtis Hanna. Ernesto Londoño then broke the story on September 14th for the New York Times, which you can read here. In short, Nixon conceded that marijuana “is not particularly dangerous,” despite calling the plant “public enemy No. 1” only two years prior. And he opined that punishments ought not be so serious for possession of the plant.

I say this news is “fun” because it’s more interesting than surprising and I doubt it will have much impact. Nixon was a mean old liar, and one with an animus toward certain groups of people. I also don’t think this revelation will persuade the vocal, diminishing minority of prohibitionists to change their minds. I like it anyway, especially as cannabis history nerd. We were right!

DEA embraces two-step review for marijuana rescheduling

This one is important, in my opinion. It relates to the method of analysis DEA must undertake when determining whether a drug, including marijuana (and psilocybin, and any other verboten substance), has a “currently accepted medical use.” In April, the Department of Justice’s Office of Legal Counsel (OLC) put DEA in a box on this one, explaining that the old, five-part test was “impermissibly narrow.” OLC thus endorsed the two-part test. On September 17th, DEA assented to the test for Schedule I review.

The two-part test bodes well for DEA’s rulemaking, now underway, to move marijuana from Schedule I to Schedule III of the federal Controlled Substances Act. How do we know? Well, the Schedule I stans don’t like it, for starters. This is because, under two-part review, a drug can have currently accepted medical use: a) even if that drug hasn’t been approved by FDA, and b) even if the drug wouldn’t pass DEA’s scrapped five-part test. So, more runway.

DOOBIE Act on the way?

I’m embarrassed even having to type that. But yes, some Congressperson named a federal cannabis bill the “DOOBIE Act,” unfortunately. With a press release and everything.

This proposal would prohibit federal agencies from denying security clearance and employment to people simply because they have used marijuana. In my reading of the actual bill, these agencies could still ding an applicant for past marijuana use, but they couldn’t “base a suitability determination . . . solely on the past use of marijuana by the individual.” The word “solely” needs to go.

Because this bill applies only to “Executive agencies” under 5 U.S. Code § 105, it also wouldn’t have prohibited, say, Joe Biden from doing his “doobie” staffers dirty, which he definitely did.

FDA gets the nod on tobacco-hemp

I like the Congressional Research Service (CRS) and often send people thataway. On September 16th, CRS published a new report titled “Legal Effect of Marijuana Rescheduling on FDA’s Regulation of Cannabis.” Here are my extremely condensed takeaways:

  1. FDA can authorize tobacco products containing hemp-derived cannabinoids (although it hasn’t yet). This is because hemp is not a controlled substance.
  2. Marijuana, even at Schedule III, would still be banned as a tobacco additive (and probably always will be). This is because FDA would need to approve specific cannabis medicines first, and it never does that for botanical drugs.

Here we have one of those cognitively dissonant outcomes often seen with the cannabis plant. As a reading of law it makes sense, but as to policy it’s nonsense. You can thank Richard Nixon and other cannabis heels for that.



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Does Hemp Have Cancer-Fighting Properties?

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Does Hemp Have Cancer-Fighting Properties?

Hemp, Weed’s Cousin, May Have More Therapeutic Value Than We Thought

 

While both hemp and cannabis come from the same plant, they possess significant differences.

 

Hemp, in particular, has become the less popular cousin of weed because more people were interested in the psychoactive properties of tetrahydrocannabinol (THC). And since hemp only contains less 0.3% or less of THC, recreational consumers weren’t keen on it.

 

Historically speaking, hemp has been famous for thousands of years across ancient civilizations around the world. It was cultivated for its reliable fibers, used in textiles, rope, clothing, and paper. Even back then, hemp’s nutritious properties were known. People ate its seeds and extracted oil, while it was used for treating many conditions in ancient China and ancient India.

 

However, hemp plants do contain a much higher amount of cannabidiol (CBD), and due to the sheer demand for CBD products lately for their medicinal benefits, hemp became better-known. Now, the global CBD market is estimated to be worth a cool US $7.71 billion, and it’s only expected to grow more. After all, the CBD in hemp has been found to be tremendously powerful especially for treating a wide range of diseases and afflictions, from anxiety to insomnia, and much more.

 

However, CBD isn’t the only therapeutic value found in hemp.

 

Can Hemp Help Fight Cancer?

A recent study by the Rowett Institute took a look into the potential value of specific fibers added to the diet of patients with prostate cancer, and its effect, if any, on tumors. The NHS Grampian Charity has invested £90,000 into this research, which has been led by Professor Anne Kiltie, who is a member of Friends of ANCHOR Clinical Chair in Oncology, at the University of Aberdeen.

The new study, which was conducted by Dr. Aliu Moomin, Dr. Sylvia Duncan, and Dr. Madi Neascu, focused on hemp fibers such as hemp hull, inulin, and pectin. They analyzed how these fibers affect gut bacteria in animal models, and its overall impact on tumor cells.

 

According to Professor Kiltie: “This funding will allow us to build on our previous work demonstrating a benefit to dietary fibre supplementation in terms of improved tumor control and protection of the bowel from radiotherapy damage, by looking at other types of fiber and how these interact with the gut microbiota,” she said. The idea is that if they notice improvements when cancer patients supplement with fiber, and it actually helps delay the progression of cancer, this would be instrumental improving patient outcomes.


We have long known that diet plays a critical role in cancer development and prevention, so it only makes sense to take advantage of the healing power of gut microbiome for cancer patients. There are several studies that show a strong link between gut microbiome and one’s cancer risk. One study in particular found that patients with melanoma, who possessed healthy gut bacteria, had much better responses to immunotherapy treatments compared to patients who had poorer gut bacteria.

 

“We hope that this work would lead to a large randomized clinical trial in the UK in men on active surveillance for prostate cancer. If the fiber supplementation is found to delay progression of the disease and prevent the need for active treatments, this would significantly improve outcomes for these patients and their quality of life,” she added, shared by a release published by the University of Aberdeen.

According to Dr. Simon Dunmore, the NHS Grampian Charity research officer: “The importance of intestinal microbiome in a wide range of health areas, including the development of cancer, is becoming increasingly highlighted by numerous scientific studies,” he said. “This study will provide important evidence of the role of a beneficial gut microbiome composition in reducing the aggressiveness and development of prostate cancer and the positive effect of dietary fibre on the microbiome,” he added.

 

Studies On Hemp Oil For Cancer


There are other studies supporting the viability and potential of hemp compounds for treating cancer. In another recent study out of Shanghai in China, researchers found that hemp oil extracts which contain the terpenes humulene and caryophyllene were found to be effective in treating pain and fighting cancer.

 

For the study, Chinese researchers analyzed the tumor-fighting and painkilling properties of hemp oil on mice. They found that after administering the hemp oil extracts, it was found to significantly reduce tumor growth. “Thes results reveal that HEO [hemp essential oil] plays a role not only in tumor chemotherapy induced peripheral neuropathy treatment, but also in anti-tumor treatment which offers key information for new strategies in cancer treatment and provides reference for the medicinal development of hemp,” they said.


Additionally, since hemp contains abundant levels of cannabidiol (CBD), it can be used for alleviating the symptoms of cancer treatment. Studies have shown that CBD is effective for helping relieve pain, stimulate the appetite, and minimize nausea and vomiting – all of which are tremendously valuable for cancer patients undergoing chemotherapy. CBD can also be integrated into one’s lifestyle to reduce chronic inflammation and stress, which, when left untreated, can contribute to cancer progression.

 

Conclusion


These studies are promising: hemp is clearly not just important for its industrial benefits, but it can also help save lives. The compounds found in hemp plants may help fight and treat cancer, shrink tumors, and even enhance the effectiveness of traditional cancer therapies. If you or a loved one want to explore using hemp for wellness and cancer prevention, you may consult with healthcare professionals for tailored medical advice.

 

HEMP FOR FIGHTING CANCER, READ ON…

CBD FOR OVARIAN CANCER

CBD FROM HEMP HELPS FIGHT OVARIAN CANCER IN NEW STUDY?



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Why is Everyone But the Youth Smoking Weed?

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In recent years, the landscape of cannabis use has undergone a surprising transformation, defying long-held predictions and challenging conventional wisdom. For decades, opponents of marijuana legalization have wielded a powerful argument: legalizing cannabis would send the wrong message to youth, inevitably leading to increased consumption among teenagers and young adults. This fear has been a cornerstone of anti-legalization campaigns, painting a grim picture of a future where young minds are clouded by widespread drug use.

However, as more states and countries have embraced cannabis legalization, an unexpected trend has emerged. Contrary to dire predictions, youth cannabis use has not skyrocketed. In fact, in many places, it has remained stable or even declined. Meanwhile, it’s the older generations who are increasingly turning to cannabis, with one of the fastest-growing demographics of users being adults over 50.

This shift isn’t limited to cannabis alone. Across the board, today’s youth are showing less interest in various substances, including alcohol and tobacco. It’s a trend that has left researchers and social commentators puzzled. Are we witnessing the rise of a more health-conscious, drug-averse generation? Or, as some might cheekily suggest, are young people today simply less inclined towards experimentation and risk-taking than their predecessors?

The implications of this trend are far-reaching, challenging not only our assumptions about drug policy but also our understanding of generational behaviors and values. On one hand, we could interpret this as a positive development – a sign that education and awareness campaigns are working, producing a generation more informed about the risks of substance use. On the other hand, it raises questions about changing social dynamics and what drives young people’s choices in today’s world.

In this article, we’ll explore the factors behind this intriguing phenomenon. Why are fewer young people turning to cannabis and other substances, even as legal barriers fall? And what’s driving older adults, particularly those over 50, to embrace cannabis in growing numbers?

By examining these trends, we hope to gain insight into the complex interplay of social, legal, and cultural factors shaping attitudes towards substance use in our society.

 

As we delve into the statistics, a clear trend emerges: fewer young people are indulging in substances across the board. Whether it’s alcohol, tobacco, or cannabis, today’s youth are increasingly abstaining. This shift has left many scratching their heads, wondering what’s behind this sudden display of temperance among the younger generation.

At first glance, one might be tempted to chalk it up to the success of drug education programs. After all, today’s youth are bombarded with information about the risks and consequences of substance use from an early age. Gone are the days of simplistic “Just Say No” campaigns and exaggerated scare tactics. Modern drug education tends to be more nuanced, focusing on harm reduction and evidence-based information.

However, as someone who went through the gauntlet of ’90s drug education myself, I can attest that knowledge doesn’t always translate to abstinence. My generation was subjected to a barrage of anti-drug messaging, yet many of us still experimented with various substances in our youth. So while improved education may play a role, it’s unlikely to be the sole factor driving this trend.

Perhaps we need to look at what today’s youth are doing instead. Enter the elephant in the room: social media. In many ways, social platforms have become the drug of choice for the younger generation. The constant dopamine hits from likes, shares, and notifications create a neurological response eerily similar to that of traditional stimulants. As kids spend more time glued to their screens, they may be less inclined to seek out other forms of stimulation.

Moreover, the ubiquity of social media has changed the nature of rebellion. When I was young, smoking a joint or sneaking a beer felt like acts of defiance against adult authority. But in a world where parents and grandparents are posting selfies and sharing memes, how does one rebel? For some youth, abstaining from substances their parents use might be the ultimate act of generational differentiation.

The normalization and legalization of cannabis in many areas have also played a role. As weed becomes more mainstream and socially accepted, it loses its countercultural edge. The image of cannabis has shifted from a symbol of rebellion to something your cool aunt does to relax after work. This transformation may have inadvertently made it less appealing to youth seeking to establish their own identity.

Lastly, we can’t ignore the practical aspects. As more adults turn to legal dispensaries for their cannabis, the street market that traditionally supplied curious teens has faced stiff competition. Legal establishments with strict ID checks have made it harder for underage users to access cannabis, potentially contributing to the decline in youth use.

In essence, today’s youth aren’t necessarily more virtuous or health-conscious than previous generations. They’re simply products of their environment – an environment that offers myriad digital distractions, blurs the lines of generational rebellion, and increasingly restricts access to substances. As we continue to navigate this shifting landscape, it’s crucial to remember that while reduced substance use among youth is generally positive, it doesn’t tell the whole story of their well-being. The challenges and pressures faced by today’s young people are unique, and our understanding and support should evolve accordingly.

 

As we turn our attention to the other end of the age spectrum, an intriguing trend emerges. While youth cannabis use is on the decline, adults over 50 are blazing up in record numbers. This demographic has become one of the fastest-growing segments of cannabis consumers, leaving many to wonder: why are the “olds” suddenly embracing their inner stoner?

To understand this phenomenon, we need to dive into the fascinating world of the endocannabinoid system. This complex network of receptors in our bodies doesn’t fully mature until around age 25. As we age, our natural endocannabinoid production tends to decline, leading to what some researchers call “endocannabinoid deficiency.” This can manifest in various ways, from mood disturbances to physical discomfort.

Enter cannabis. When older adults consume marijuana, they’re essentially giving their endocannabinoid system a much-needed boost. It’s like adding oil to a squeaky machine – suddenly, things start running more smoothly. Many report improvements in sleep, mood, and general well-being. It’s not just about getting high; for many, it’s about feeling balanced and functional.

Moreover, as we age, our bodies become less resilient to the effects of alcohol. A night of heavy drinking in your 20s might result in a manageable hangover, but the same indulgence in your 50s or 60s can knock you out for days. Cannabis, on the other hand, offers a gentler experience. You can enjoy an evening toke and still be ready to face the day come morning. For many older adults juggling work, family, and other responsibilities, this is a significant advantage.

Accessibility is another crucial factor. As more states legalize cannabis, it’s becoming increasingly easy for adults to walk into a dispensary and purchase high-quality, regulated products. Gone are the days of relying on sketchy dealers or questionable sources. This ease of access, combined with the normalization of cannabis use, has made it a more appealing option for older adults who might have been hesitant in the past.

Let’s not forget the economic aspect. In many cases, cannabis can be a more cost-effective option than alcohol, especially when consumed in moderation. A single joint can provide an evening’s worth of relaxation, often at a lower cost than a night out drinking. For retirees or those on fixed incomes, this economic advantage can be particularly appealing.

The health benefits of cannabis, especially when compared to alcohol, can’t be overstated. While excessive use of any substance can be harmful, moderate cannabis consumption doesn’t carry the same risks of liver damage, addiction, or long-term health consequences associated with alcohol abuse. For older adults looking to unwind without compromising their health, cannabis presents an attractive alternative.

In essence, the rising popularity of cannabis among older adults is a perfect storm of biological, practical, and social factors. It offers a way to potentially improve health and well-being, provides a gentler recreational experience, and aligns with changing social norms. As more research emerges on the potential benefits of cannabis for age-related issues, we may see this trend continue to grow.

Of course, it’s important to note that cannabis use, like any substance, should be approached responsibly and with an understanding of potential risks and interactions with medications. But for many in the over-50 crowd, it seems that cannabis is proving to be a welcome addition to their golden years.

Who would have thought that the “reefer madness” generation would end up being the ones to fully embrace the green revolution?

 

CANNABIS USE DROPS AMONG YOUTH, READ MORE..

WHY TEEN MARIJUANA USE DROPS AFTER LEGALIZATION

WHY CANNABIS USE DROPS 9% IN TEENS AFTER LEGALIZATION!

 

 



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