The phones of North Bay real estate agents have been ringing since California law created a regulatory framework for licensing medical marijuana operations, but uncertainties of local and federal law means finding commercial property for these businesses has been challenging.
The signing of the state Medical Marijuana Regulation and Safety Act, or MMRSA (“Mersa”), in October prevents state criminal prosecution and civil asset forfeiture of licensed cannabis operations and the owners of property they lease or buy. But exposure to federal action has remained somewhat nebulous until recently, according to Joe Rogoway, whose Rogoway Law Group in Santa Rosa specializes in cannabis cases.
“There isn’t a fear of the property owner losing the property from leasing to a legitimate cannabis operator,” Rogoway said. For him, the U.S. government position has cleared up. “The federal government at this point is disallowed from investigation or prosecution.”
On May 3, the U.S. Justice Department dropped a lawsuit against the Harborside Health Center dispensary in Oakland. The department in 2012 had sued to seize the dispensary’s property via a process called civil asset forfeiture. Such an action was used to close Marin Alliance for Medical Marijuana in Fairfax in 2011, but a landmark federal appeals court ruling in favor of the dispensary in October stated the department’s prosecutors were going against congressional action in 2014 and 2015 defunding of such enforcement.
“There is an unprecedented amount of safety for owners and operators at the state and federal level,” Rogoway said.
Though MMRSA took effect Jan. 1, the 17 state license types for various stages of cannabis production from plant to patient aren’t expected to be issued until 2018. However, some local jurisdictions have put in place regulations for operations — or bans — based on existing California law, notably Proposition 215, or the Compassionate Use Act of 1996.
Still, marijuana remains listed along with heroin, LSD, ecstasy and peyote as a Schedule 1 “most dangerous” drug, according to the Drug Enforcement Administration.
Until state medical cannabis licenses kick in, California votes decide whether to legalize recreational use in November and local governments decide on permitting certain types of operations, real estate for those businesses can be risky. And that makes a number of local real estate attorneys and real estate agents nervous.
“(Real estate agents) don’t have a habit calling attorneys for real estate transactions,” said Philip Green, partner in San Rafael-based Green & Green (GreenAndGreen.com) and member of California Cannabis Bar Association. “They should be monitoring themselves because of the huge illegal aspect with that. I do not see real estate agents selling buildings to produce meth. It’s just as illegal as meth. They need to have some legal help with that.”
Methamphetamine, along with cocaine, is a Schedule 2 “dangerous” drug, according to the DEA.
Helen Sedwick, whose Santa Rosa-based Bennett Valley Law firm focuses on commercial real estate, said she and a half-dozen of her colleagues in similar practice in the area avoid cannabis clients because of past federal action.
“These deals still happen because these operations willing to pay more to a lender and landlord to compensate for these risks,” Sedwick said.
Complicating factors for transactions have been uneasiness of businesses around cannabusinesses, particularly retail businesses such as dispensaries with a number of people coming, going and sometimes loitering, she said. Because of the nebulous federal legality, a number of these businesses and patients have operated on a cash basis, potentially increasing the risk of crime, she said.