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Legal Issues of Leasing to Cannabis Businesses
Adult use of marijuana is, as of this writing, legal in 18 states. In some states, such as New York and New Jersey, recently signed legislation could have marijuana available in businesses as soon as next year.
Of course, most or all of these new businesses will need to lease commercial space in order to operate — and undoubtedly, many real estate owners are eager to meet this new demand, especially in light of the toll the COVID pandemic and the shift to online shopping have taken on bricks-and-mortar retail assets. However, owners and prospective cannabis businesses have many legal issues and questions to consider before entering into lease agreements.
Notwithstanding the passage of state legalization and licensing legislation, marijuana remains illegal under federal law pursuant to the Controlled Substances Act of 1970 (CSA). The CSA provides that it is unlawful to knowingly open, lease, rent or maintain any space for the purposes of manufacturing, distributing or using any controlled substances, including marijuana (CSA, 21 USC §856). The Supremacy Clause of the U.S. Constitution establishes that when state and federal law conflict, federal law — in this case, the CSA — controls (U.S. Constitution, article VI, clause 2).
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