Medical Marijuana Commercial Tenant?

Question

In San Diego County, CA.  We're trying to lease a 4000sf retail space.  We've had 2 Medical Marijuana prospects contact us.  We understand that there may be banking problems.  Are there other things to be weary of?  I'm concerned about some sort of scam?

Scott R. · Answer

I checked weedmaps.com for dispensaries in Ramona. There are four delivery services, and no walk in dispensaries. Delivery services are much easier to get approved than brick and mortar med shops. If you only see delivery services in an area that is a huge red flag. If it was cool to open a shop there, you'd see them around already.

Bruce May · Answer

@Jon A. the banking issue would be their not yours which means they likely can only pay you in cash or money order for their rent. As a retired cop I can tell you that you will run the risk of having your property seized by the DEA if you knowingly allow the business to operate in your building... or at least that was the case a couple years ago when I was still on the job. Who knows how it is these days our D.A. refuses to even deal with the possession cases.

Christopher Telles · Answer

In many areas cities are trying to eradicate that particular use from their jurisdiction. There is still much controversy over the legality of that product in California.

The city of Los Angeles, and many other cities in So Cal, have taken strong stances against tenants in buildings concerning their use, their occupancy permits, and their stringent review of the premises which may or may not impact the landlord depending on the city's findings.

I'm in the CRE business and I won't have anything to due with this type of tenant. They'll offer to pay as much as 2X market rents sometimes. The thought of having the deal with local government building & health departments persistently finding problems, DEA agents, and possibly other agencies should the tenant do something illicit in their business is just not worth the rent, and or the xtra rent.

Account Closed · Answer

http://www.denverpost.com/news/ci_28947869/colorad...

Colorado monthly marijuana sales eclipse $100 million mark

Colorado recreational marijuana sales are close to $60 million in August 2015; medical marijuana sales climb slightly

Looks like a runaway freight train

John Arendsen · Answer

I just received this link from Bruce May. As this is a somewhat older post and Bruce hasn't revisited recently I thought I'd pass it along.

http://www.washingtonpost.com/news/wonkblog/wp/2015/10/20/federal-court-tells-the-dea-to-stop-harassing-medical-marijuana-providers/

Matt M. · Answer

It is a CASH cow here in Denver. Literally. Rent gets paid in a brown bag. Places charge a premium if you can find one. California might have a bit more risk since you guys don't have the same structure in place like we do as far as feds, etc goes.

High deposits, landlords asking to keep all improvements/equipment if tenant leaves, etc are all common. Just make sure they have money backing them. The last thing you want is a tenant that can't pay up.

Dale Shin · Answer

If the Feds get wind of a mmj tenant they may start by sending you a letter to get rid of that tenant within a certain time frame and if you don't, your property may be subject to seizure.  The bigger issue may be that your lender will have an issue with the mmj tenant, that is if you have a loan on it.

Put a clause in the lease allowing you to terminate at any time with 30 say notice, the mmj tenant may actually want that as well.  Then cash in!!

Account Closed · Answer

San Francisco and Denver both reported annual price gains of 10.7 percent, the largest of any city. Portland, Oregon's annual gain of 9.4 percent was the third

http://www.cbsnews.com/news/home-prices-showed-sol...

Looks like marijuana is not hurting the real estate business

Kevin Romines · Answer

Insurance would be a big question for you?

I have a few specialty carriers that that I know of that will write the risk, however your existing insurance carrier will most likely not write it. I would put in the lease that they are responsible for carrying the insurance on the building with minimum specified limits. You need to be listed as a lessor and as a certificate holder. This will give you notice if their policy ever terminates for any reason.

Chanté Owens · Answer

Also, just know that your insurance will likely be more expensive for your property insurance, as the regular carriers do not write this type of insurance (at least not here in Washington State). No State Farm, Allstate, Foremost, etc. You will need to get special insurance, and the tenants will need to do the same; which may be a cost you pass on to the tenant.

Obviously they will also need to get insurance for their business too, depending if they are a retailer, processor or grower. Again, I'm not sure about California, but in Washington, the Liquor & Cannabis Board have specific guidelines around the types of safe you have to have on premise, as well as cameras, etc, in respect to the security issues that someone mentioned earlier in the thread. I'm not sure what California does or does not require, so as a landlord, you'd want to be aware if there would be some sorts of special tenant betterment & improvements that would be completed on your property.

​Medical Marijuana Commercial Tenant?

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Medical Marijuana Commercial Tenant?