Hashish leasing is extremely difficult for each lessors and lessees. However issues can get much more difficult in aggressive license jurisdictions. I’ve labored with each lessors and lessee-applicants in aggressive licensing jurisdictions, and in the present day wish to spotlight a few of the key issues I’ve seen over time.
#1 Why aggressive licensing is totally different from every part else
Should you’re studying this and are usually not accustomed to aggressive licensing, I’m referring to localities (or in some instances, states) that solely enable a small, fastened variety of licenses. In aggressive licensing jurisdictions, you’ll typically see dozens of candidates for a small handful of accessible licenses – for instance, thirty or so candidates for 4 licenses.
You might level out that the majority cities in actual fact have some type of cap on licenses, both expressly, as a result of there’s a finite software window, or as a result of there’s restrictive zoning. Nevertheless, what I seek advice from as aggressive licensing is a state of affairs the place, possibly 1-6 licenses might be out there in a single brief software interval.
That is why I seek advice from “aggressive” licensing. And it will get actually aggressive. Candidates could find yourself spending a whole bunch of hundreds on authorized, design, consulting, and different charges to only to submit an software. With none warranty of success.
In order you’ll be able to think about, this creates some fairly fascinating dynamics for hashish leasing. And that brings me to level #2.
#2 Is a hashish lease even necessary?
Put yourselves within the sneakers of a aggressive license applicant. You might be spending a whole bunch of hundreds of {dollars} submitting an software with no warranty of success. You might be up in opposition to a dozen or extra extremely capitalized, extremely certified corporations on the lookout for the identical license. Do you wish to get locked right into a multi-year lease with none warranty of with the ability to function? Clearly not.
Many localities handle this by requiring candidates to supply one thing lower than a full-fledged lease. This will embody a lease with an early termination proper if the license doesn’t come by. Or it may very well be so simple as an choice to lease and even an LOI. Lately, the pattern appears to be in favor of binding choices to lease, which is mostly extra “binding” than a easy LOI.
In all of those instances, the lessor often needs one thing to permit the lessee to use for the license. If there’s a lease with an early termination choice, this can be decreased hire for some preliminary interval – generally even decreased by a buildout. If it’s an choice, there could also be a month-to-month choice price that might be commensurate with some type of decreased hire. However general, lessors are usually charging the lessee one thing. In spite of everything, they’re protecting the property off the market whereas the lessee applies for a license.
#3 Location, location, location
Each aggressive licensing and extra “open” jurisdictions restrict potential areas to particular zones and areas inside their borders. There are additionally usually buffer necessities (e.g., you’ll be able to’t be subsequent to a faculty). In my expertise although, aggressive licensing jurisdictions are typically even extra restrictive by way of the place candidates could apply. A pattern I’ve seen is that candidates should typically get a “zoning verification letter” previous to making use of. A ZVL will enable the town to supply some preliminary sign-off on the proposed location.
In a jurisdiction with a restrictive location map, potential lessors are in for lots of calls. I’ve labored with aggressive licensing lessors who get quite a few calls from brokers or potential lessees for leasing in restrictive map conditions like this. Clearly, because of this rental worth can go up – means up.
On the similar time, lessors usually have zero expertise with hashish and are unfamiliar with hashish legal guidelines. Lessors should be cautious to not make guarantees about zoning, location compliance, buffer zone restrictions, or anything. This needs to be squarely on the shoulders of the possible lessee. Good lessors disclaim and representations about principally something of their agreements with the lessees.
#4 Lessors ought to anticipate some participation within the course of
In any aggressive hashish licensing course of I can keep in mind, lessors are required to submit paperwork to the town that authorize the applied-for use. For some purpose, merely signing a lease that authorizes the use simply isn’t sufficient. So many localities require lessors to signal paperwork acknowledging that their lessee might be approved to interact in hashish use as soon as licensed. The pattern now appears to be to require lessors to signal not simply statements, however notarized attestations.
Some localities go above and past. I’ve seen some that require lessors to certify that they solely leased the property to the lessee at concern, in an effort to ban lessors from coming into into a number of choices to have fallback choices if one proposed lessee doesn’t get a license (extra on that under). Lessors ought to concentrate on what they’re signing so that they don’t find yourself responsible for some type of false assertion and even perjury.
#5 What can lessors do to hedge their danger?
Most localities require that lessors solely authorize one particular entity to use for a license on the lessor’s property. That is good for the proposed tenant, who has no competitors for the particular property (in spite of everything, what would occur if two corporations gained on the similar property?). But it surely’s not nice for lessors, who should belief that their proposed lessee will beat out all of the competitors or stroll away. What landlord would wish to get property leased for only some months and begin that course of another time?
Some cities handle this by permitting lessors to authorize a number of candidates on the similar handle. That is clearly higher for lessors. But it surely’s not nice for lessees for the inverse purpose of what I famous above. In these locations, lessors ought to anticipate to see proposed lessees demanding exclusivity – and in these instances the lessors could also be justified in asking for greater choice funds.
Conclusion
Aggressive licensing is hard, however could be made much more tough if the property proprietor and proposed lessee aren’t on the identical web page. Coping with the problems raised above is essential on the outset, or an applicant can waste lots of money and time on a state of affairs that gained’t work. Keep tuned to the Canna Law Blog for extra hashish actual property points.