Marijuana & Real Estate in California and Los Angeles County

The Compassionate Use Act of 1996 allows marijuana use pursuant to a valid doctor's recommendation and does not provide a blanket legalization of marijuana use.  The legal marijuana market earned $2.7 billion in revenue in 2014 and is expected to earn over $10 billion in sales by 2018.  Marijuana is permitted for medical use in 23 states and D.C., and four states (Alaska, Colorado, Oregon and Washington) have recreational laws.

The marijuana industry needs lots of land and business are willing to pay top dollar to get it.  There is a need for cultivation, product manufacturing, dispensaries (collectives) and kitchens.  In order to operate a marijuana business, the operator must be in compliance with state and local laws.  California law permits personal marijuana cultivation for patients.  Refer to Senate Bill 420. 

Why would a seller/landlord want to sell or lease to a marijuana operator?  Because marijuana operators usually pay cash and they are usually willing to cooperate with additional demands, and they generally pay on time.  They also will usually agree to sign an indemnity contract to release the landlord from liability. 

In Los Angeles county, a dispensary cannot be located within a 1,000-foot radius of a school, playground, park, library, place of worship, child care facility, youth facility (hostels, camps, clubs etc...) or within a 1,000-foot radius of another dispensary. 

A few things a landlord can do to protect themselves.  Make sure the operator is legal under state law.   Ask the operator for proof of insurance.  Draw up a contract to protect the landlord (indemnity clause).  Have a security system installed.  Verify proper building permits.  Inspect the building periodically.  Note that it is not legal to lease to a tenant who violates a local ordinance that prohibits marijuana businesses. 

Demand for commercial and industrial buildings by marijuana operators is on the rise.  Many cities are reviewing their ordinances in preparation for recreational laws to pass and to take into account factors like increased tax revenue. 

This post is for informational use only.  Reader to independently verify the contents of this post and consult legal counsel. 

General Business & Real Estate