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A Guide to Leasing to California Cannabis Tenants

Published

3 months ago

August 5, 2024

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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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Is Kratom Addictive? Understanding Dependence, Risks, and Safe Usage

Published

7 hours ago

November 12, 2024

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is kratom addictive

Is kratom addictive? Discover the potential for dependence on Kratom, the risks involved with its use, and how to approach its consumption responsibly.

From 2011 to 2017, over 1,800 calls to poison centers involved kratom in the U.S. This significant number highlights the concern regarding kratom addiction.

However, without Food and Drug Administration (FDA) oversight, and due to various consumption methods like teas and capsules, there are significant health risks. Safe use of kratom is now in question due to these issues.

Research debates how dependence develops, outlining signs like loss of control and withdrawal symptoms. These signs are seen in regular kratom users. Ironically, some people switch from drugs like heroin to kratom, looking for a legal alternative.

Understanding Kratom: Origins and Prevalence

Kratom comes from the Mitragyna speciosa tree in Southeast Asia. It can act like a stimulant or like opioids, based on how much you take. People use it in different ways, for a small energy boost or stronger effects at higher doses.

The legal status of kratom in the U.S. is complicated and changing. It’s a hot topic because some worry about its misuse. It’s still legal in several states. This shows how different places handle drug rules. The National Institute on Drug Abuse is looking into its medical benefits. But, the FDA hasn’t approved it for medical use yet. The DEA calls it a “drug of concern,” which means policies might change.

From 2011 to 2017, poison control centers in the U.S. got over 1,800 reports about kratom. This shows it’s widely used and might pose health risks.

Kratom’s main ingredients bind to opioid receptors very strongly, stronger than morphine even. This fact is key to understanding its effects.

As more people use kratom, more are reporting serious health problems. These include liver and heart issues, and tough withdrawal symptoms, particularly in those already sick.

The statistics show mounting worries about kratom in the U.S. As its use grows, it’s becoming more important to health policies and laws. What happens next will depend on further research and legal decisions.

Is Kratom Addictive: Investigating the Substance’s Nature

The question of kratom’s addictiveness focuses on how it affects brain receptors and its long-term health implications. The ongoing debate highlights concerns about dependence and the risk of addiction. Scientists are closely looking at these issues.

How Kratom Works in the Brain

Kratom’s main alkaloids, mitragynine and 7-hydroxymitragynine, bind to the brain’s opioid receptors, similar to painkillers and narcotics. This connection suggests a potential risk of dependence. These alkaloids are key to kratom’s pain relief but also point to possible addiction concerns, especially with frequent, high-dose usage.

Patterns and Consequences of Long-term Use

Using kratom often, especially in large doses, can increase the risk of dependence and intense withdrawal symptoms, similar to opioid withdrawal.

Although some use it for pain or to improve mood, long-term kratom users might see serious health problems, like liver damage and mental health issues.

Withdrawal symptoms, including irritability, nausea, and sleep problems, show kratom’s impact on one’s physical and mental health.

Assessment of Addiction Risks

Studies indicate a significant risk of addiction to kratom, especially with high doses or frequent use. Dependence develops as the body gets used to kratom, leading to tolerance and a need for more to feel its effects. Withdrawal symptoms emphasize this risk, as highlighted by health experts.

Physiological Effects: Kratom’s Impact on the Body

There is a lot of debate about the safety and use of kratom. This herbal extract comes from the Mitragyna speciosa plant. It has drawn attention for its possible harmful effects on the body. The FDA has issued many warnings about kratom, raising safety concerns.

Kratom Adverse Effects: Kratom users have reported side effects like nausea, vomiting, and confusion. More serious issues include high blood pressure and liver damage. These problems highlight the risks of using kratom.

Herbal Extract Safety: Some kratom products contain heavy metals and pathogens. These can cause severe health issues, including death. This shows the importance of safety in herbal products.

FDA Warnings and Regulations: The FDA has linked kratom to over 35 deaths and warns against using it. They point out the lack of medical uses and the risk of addiction.

Physiological Impact: Kratom’s effects depend on the dose and the user’s body. Yet, it can lead to dangerous outcomes like liver damage and seizures.

Safety Concerns from Authorities: Federal agencies like the DEA are worried about kratom’s safety. Although not a controlled substance, monitoring suggests users should be careful.

Kratom might offer temporary relief for some ailments, but it comes with significant risks. The FDA’s warnings should make people think twice. If considering kratom, it’s crucial to talk to a doctor first. Experts stress the need for safety and caution with herbal extracts.

Conclusion

Kratom’s role in health and regulation is complex, with views and research findings widely varied. Some people use kratom for its claimed health benefits, but it’s a hot topic. Experts advise caution and suggest consulting a doctor before using kratom due to the unclear effects.

Clinical studies using scores like SOWS and COWS haven’t confirmed withdrawal symptoms from kratom. This adds to the debate, especially when some users report withdrawal. This makes kratom a controversial subject among different findings and user experiences.

When it comes to treating opioid addiction, kratom can be both helpful and harmful. Some have used it successfully to fight addiction. Yet, some states have banned it. This highlights the need for regulations and consistent product quality. It also raises questions about kratom’s legal status due to mixed actions by authorities.

The situation shows how complex kratom is in the realm of substance use and law. Without clear evidence supporting either its benefits or risks, it poses a challenge. More research is needed to guide regulations and health advice. For now, anyone thinking of using kratom should be careful, seek medical advice, and keep up with laws and health guidelines.

WHAT IS KRATOM ANYWAY? READ ON…

WHAT IS KRATOM AND WHY ARE YOU HEARING ABOUT IT NOW?

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New Rule, December 5: Oregon Cannabis Retailers, Processors and Labor Peace Agreements

Published

8 hours ago

November 12, 2024

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Oregon’s Measure 119 passed last week, as expected. This means that as of December 5^th, every OLCC licensed retailer, processor, researcher and testing lab must secure a labor peace agreement before OLCC will approve a new or renewal license application. The labor peace agreement must be with a “bona fide labor organization.”

I previewed M119 back in September, explaining:

Compulsory peace agreements aren’t anything new in cannabis, although it would be something different here in Oregon. California, for example, requires labor peace agreements for many of its cannabis licensees, and has for many years. We had clients struggle with the concept initially, and we saw some fumbled rollouts, but people eventually adjusted.

Measure 119 further provides that retailers and processors would be required to remain neutral, under the peace agreements, when labor organizations communicate with employees about collective bargaining rights “with any licensure or renewal application.”

M119 may be legally problematic

I’m not a First Amendment lawyer, but it’s not clear to me that an Oregon business can be constrained from speaking with employees– regardless of what M119 provides. Oregon’s speech protections are extremely broad, which is why we have a naked bike ride, tons of strip clubs and no campaign finance restrictions.

I’m also not a labor lawyer, but I’m told M119 could hit a snag on the National Labor Relations Act.

I’ve run these concepts by an Oregon First Amendment lawyer and a couple of labor lawyers, and all confirmed to me that M119 has real exposure. I found that feedback interesting, because M119 sponsors would have understood this when they set out signature gathering. Back in September, I wrote:

The United Food and Commercial Workers Local 555 spent a good deal of money to get Measure 119 on the ballot, rounding up some 163,000 signatures when only 117,173 were required. This follows on a stymied effort to get House Bill 3183 passed last year, which would have accomplished the same thing legislatively.

HB 3183 failed after a couple of advisory letters from the State of Oregon, Legislative Counsel Committee (see here and here). Those letters discussed preemption exposure for what is now M119 under the National Labor Relations Act, The Taft Hartley Act, and other federal laws. Oregon Business and Industry, the largest business group in the state, also submitted opposing testimony, highlighting legal exposure.

As to the First Amendment issues, anyone watching this is advised to follow litigation recently brought by Ctrl Alt Destroy, Inc., on a similar requirement in California.

So let’s see how that goes, and let’s see if anyone in the Oregon cannabis space wants to make a run at litigating M119. For now, credit to UFCW Local 555, I guess, for not giving up and for getting this thing on the ballot. And for having some fun by slipping a Rickroll into the voter pamphlet. I’m sure that won a few people over.

The OLCC process

I don’t have any information yet on what OLCC is going to do ahead of the December 5^th deadline. It’s worth noting that, in addition to California, other recreational cannabis states including New York, New Jersey, Rhode Island, Connecticut and Delaware all have similar requirements. Most likely, OLCC will put out an FAQ page very soon that looks something like this and licensees will need to upload something or other to CAMP with respect to any post-December 5^thapplication or renewal.

As far as OLCC licensees negotiating these agreements, the best approach would be to speak with experienced labor counsel. Labor law is highly specialized, and negotiating a labor peace agreement with any outfit claiming to be a “bona fide labor organization” is not a typical exercise.

For now, this is just one more thing for licensed cannabis businesses to comply with. Please reach out to us if you have any questions or need a referral.

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The CBD Dog Treat Guide

Published

9 hours ago

November 12, 2024

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CBD dog treats good or bad

As the popularity of CBD (cannabidiol) continues to rise, many pet owners are exploring its potential benefits for their furry companions. CBD is derived from the hemp plant and is known for its therapeutic properties, which may help alleviate anxiety, pain, inflammation, and other health issues in dogs. However, when considering CBD treats for your dog, it’s crucial to understand the ingredients that go into these products. This article will delve into the essential ingredients to look for in CBD treats, their benefits, potential risks, and how to choose the right product for your canine friend.

Understanding CBD and Its Benefits for Dogs

Before we dive into the ingredients, it’s important to understand what CBD is and how it can benefit dogs. CBD is a non-psychoactive compound found in cannabis plants. Unlike THC (tetrahydrocannabinol), which can produce a “high,” CBD does not have intoxicating effects. Instead, it interacts with the endocannabinoid system (ECS) in both humans and animals, which plays a crucial role in regulating various physiological processes.

Potential Benefits of CBD for Dogs

Anxiety Relief: Many dogs experience anxiety due to various factors such as loud noises, separation from their owners, or changes in their environment. CBD may help reduce anxiety levels by promoting a sense of calm.

Choosing the Right CBD Treats

When selecting CBD treats for your dog, it’s essential to look beyond just the CBD content. The overall quality of the treat is equally important. Here are some key ingredients you should be aware of:

1. High-Quality CBD Oil

The foundation of any good CBD treat is the quality of the CBD oil used. Look for treats that contain:

Full-Spectrum or Broad-Spectrum CBD: Full-spectrum products contain all cannabinoids found in the hemp plant, including trace amounts of THC (below 0.3% as per legal standards). Broad-spectrum products contain multiple cannabinoids but no THC. Both types can provide an “entourage effect,” enhancing the therapeutic benefits.

2. Natural Ingredients

Just like human food, the ingredients in your dog’s treats matter significantly. Look for treats made with natural ingredients rather than artificial additives or preservatives. Here are some beneficial components:

Whole grains like oat flour or brown rice flour provide essential nutrients and fiber that support digestive health. They are also a good source of energy for active dogs.

Healthy fats are vital for maintaining your dog’s coat and skin health. Ingredients like coconut oil or peanut butter not only enhance flavor but also provide beneficial fatty acids that support overall well-being.

Incorporating fruits and vegetables into your dog’s treats can boost their nutritional value:

To make treats more appealing without resorting to artificial flavors, look for natural flavorings like chicken broth or carob (a chocolate substitute safe for dogs). These ingredients can enhance taste while keeping the treat healthy.

3. Functional Ingredients

Some treats may include additional functional ingredients designed to address specific health concerns:

These compounds are often included in joint support treats to help maintain joint health and mobility, especially in older dogs or those with arthritis.

Probiotics can promote gut health by supporting a healthy balance of bacteria in your dog’s digestive system.

Certain herbs like chamomile or ginger may offer calming effects or aid digestion. Always ensure these herbs are safe for canine consumption before choosing treats containing them.

Ingredients to Avoid

While there are many beneficial ingredients to seek out, it’s equally important to know which ones to avoid:

1. Artificial Additives

Many commercial pet treats contain artificial colors, flavors, and preservatives that can be harmful to your dog’s health. These additives may lead to allergic reactions or other health issues over time.

2. High Sugar Content

Just like humans, dogs do not need excessive sugar in their diets. Treats high in sugar can lead to obesity and dental problems.

3. Low-Quality Fillers

Avoid treats with low-quality fillers such as corn syrup or by-products that do not provide any nutritional value.

4. THC (Tetrahydrocannabinol)

Always ensure that any CBD product you choose contains less than 0.3% THC to avoid any psychoactive effects on your dog.

How to Introduce CBD Treats Safely

When introducing any new treat into your dog’s diet—especially one containing CBD—it’s essential to do so gradually:

Start Small: Begin with a small amount of the treat to see how your dog reacts.

Monitor Your Dog: Observe your dog for any adverse reactions such as changes in behavior or gastrointestinal upset.

Adjust Dosage as Needed: Depending on your dog’s size and needs, you may need to adjust the dosage over time.

Consult Your Veterinarian: Before starting any new supplement regimen, including CBD treats, consult with your veterinarian—especially if your dog has existing health conditions or is taking other medications.

Conclusion

CBD treats can be a beneficial addition to your dog’s diet when chosen carefully with attention to ingredient quality and safety. By understanding what goes into these treats—such as high-quality CBD oil, natural ingredients, functional additives—and knowing what to avoid, you can make informed decisions that support your dog’s health and well-being.

Always prioritize transparency from manufacturers regarding ingredient sourcing and product testing; this will ensure you’re providing your furry friend with safe and effective options tailored to their needs. With proper research and guidance from a veterinarian, you can confidently explore the potential benefits of CBD treats for your beloved pet while ensuring they enjoy a tasty snack that’s good for them too!