It’s been a while since we wrote a post about cannabis licensing in Oregon. This blog post will look at some frequently asked questions from the perspective of an attorney who has worked on hundreds of such transactionssince the first licenses were transferred.

Is the OLCC Issuing New Marijuana Licenses?

Yes, but according to the “one in and one out” protocol. The only way to get a cannabis license in Oregon (other than a lab license) is to find a willing seller and make a coordinated deal with that seller and the OLCC. This protocol followed Oregon’s robust secondary “bare license” transmission market from January 1, 2022when the OLCC stopped accepting applications for new licenses due to a saturated market and administrative backlog.

What types of cannabis licenses are available?

The OLCC issues five basic licenses for marijuana production: grower, processor, wholesaler, retailer, and laboratory. Production licenses are offered for domes of various sizes, both indoor and outdoor, and the buyer is allowed to scale up or down. In other words, a micro-level manufacturer may agree to “sell” its license to a new licensee at Level I or II.

For the sake of completion, there is also a certificate of studies. These are available directly from the OLCC and are not subject to a one-for-one policy, as is the case with laboratory licenses.

How to find a license?

You need to find a seller. Sometimes it’s through word of mouth and networking; other times people make these deals through brokers. We recommend CannXperts as there is a gold standard. We are too recommendvery strongly, never sign any type of “license sale” agreement offered by a broker. It’s a sad fact of life in my office that we deal with messy broker situations on a weekly basis.

How much do licenses cost?

Prices have fluctuated over the years. Today, we see producer licenses trading in the $90,000 to $120,000 range. Processor licenses are sold for 25–30 thousand dollars. Wholesalers go for that or less. And retail licenses are usually priced according to store performance. For example, a store with annual sales of $1.5 million will sell for much more than a store with $500,000.

What does the license purchase agreement look like?

Most take the form of an asset purchase agreement and may include additional assets (eg, equipment, inventory) in addition to the license transferred. Less often, but especially for larger deals, we structured it as a stock sale. Typically, an escrow agreement has an escrow component.

All of this is often accompanied by an (optional) LOI and sometimes even a non-disclosure agreement. It is very important to have an attorney in mind for anything you hope to sign; or better yet, have an attorney do the drafting so you don’t waste time and money fighting horrible forms.

Can I be licensed in a new location?

yes. Many of these deals have a change of location component as well as a change of ownership. In either case, the OLCC requires a Land Use Compatibility Statement (LUCS) for the incoming licensee and will also require notarized proof of landlord consent in the context of grower and processor licenses. Outgoing and incoming licensees will also be required to be inspected by an OLCC inspector at each applicable location.

What should I do first?

Once you find a willing seller, it’s time to do some basic due diligence. This can happen before the purchase agreement is signed or during a specified period after signing. Some due diligence will be basic, such as whether the seller is a business in good standing with the Oregon Secretary of State (some are not) and whether the person representing the seller is actually authorized to sell (some are not). Other precautions will depend on the type of license: for example, in the case of retail, the seller will need to obtain a tax compliance certificate from the Oregon Department of Revenue.

How to apply? And what documents are required?

You apply through the OLCC CAMP online portal. If you want a preview of what’s required, the forms are there here. Some owners will be required to pass a background check which includes fingerprints etc.

After creating your CAMP account and uploading your application documents, you pay the appropriate fees and respond to any additional requests from the Commission. This usually happens after your case has been assigned to an investigator, which happens within a week of applications being closed.

Anyone working on the premises, including the owners, will also need to obtain a permit to produce marijuana.

How much does it cost?

The price varies depending on the type of license and, in the case of producer licenses, the size of the canopy. There is also a $250 fee for all license types. In addition, the OLCC publishes a complete list of fees on its website—simply click on the “Fees” link under the “Other Forms & Resources” heading. Finally, be aware that some jurisdictions like the city of Portlandhave their own licensing requirements and annual fee schedule. These requirements are mainly ill-conceived and redundantbut you must comply regardless.

How long does it take?

The time depends on the type of license, the completeness of the application and the availability of inspectors in the relevant region. We have seen organized transactions take two to three months. It should also be noted that all applicants must complete the application process within 60 calendar days of the appointment of an investigator. Otherwise, the OLCC will deactivate the application, which can cause real problems with purchase agreements.

What mistakes should be avoided?

I have already considered dealing with a broker. Another problem we often encounter is license holders handing over approval keys, sometimes in the jurisdiction of contract for servicesat this point, financial considerations can become confusing and compliance issues often arise. Another challenge involves negotiating with the landlord and assuming that the lease will be transferred when it is not. But the biggest problem is simply transferring money without protection for various reasons. Unfortunately, this happens often.

Bottom line

Oregon’s secondary cannabis license transfer market is robust. From this lawyer’s point of view, the process is simple and does not require excessive complexity. Nowadays, OLCCs are easy to work with and these deals have simple protocols from start to finish.

However, there are also plenty of pitfalls and no shortage of unscrupulous characters. It’s best to work with someone who does this every day to make sure you’re getting in (or out) with minimal friction and as much protection as possible. Call us when you are evaluating a transaction.

Source: Legal Canna Blog