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Smoke & Mirrors: The New York Cannabis Law's Illusory Lease Mandate

By Marjorie J. Peerce, Michael P. Robotti and Kamera Boyd
November 01, 2021

New York's recently enacted cannabis law, the Marijuana Regulation and Taxation of 2021 (MRTA), created a maze of new legal requirements. These provisions affect not only cannabis companies, but also the companies that conduct business with them. Navigating this maze can be tricky, especially since much of the MRTA conflicts with federal law. One particularly complex area is the regulation of New York real estate as it relates to cannabis companies. Cannabis companies and landowners alike should be wary of the legal pitfalls in this area and seek appropriate legal guidance.

Under the MRTA, New York will grant licenses to companies to distribute cannabis. Although these companies will be state-licensed, it likely will violate the federal "stash-house law" to lease property to them. Landowners may be reluctant to lease to licensed cannabis businesses and risk federal criminal liability, when they could lease to other types of businesses without that risk. This landowner reluctance could create a Catch-22 for cannabis companies: to get a state license, they need property from which to operate their cannabis business; but to get property, under federal law, they cannot plan to sell cannabis from it.

The MRTA contains a provision that seems like it could help cannabis companies with reluctant landowners; specifically, it has a lease mandate, which prevents landowners from discriminating against at least some participants in the legal cannabis market. Precisely who the lease mandate protects, though, is subject to debate. While it could be read to prevent landowner discrimination against cannabis consumers and cannabis companies — as opposed to just cannabis consumers — such an interpretation likely would result in federal preemption of the mandate. To avoid preemption, courts likely will interpret the mandate narrowly, prohibiting discrimination only against cannabis consumers. So, cannabis companies should not put too much stock in this mandate when attempting to secure a property.

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