In the last decade, cannabis has waltzed into our lives, shaking things up like a cat in a room full of rocking chairs. With recreational use now free to roam in 11 states, D.C., and two lucky territories, it’s practically the high school prom king. Medical cannabis isn’t far behind, strutting its legal moves in 22 states without batting an eyelash about THC content, while another 14 states impose the tiniest of limitations. A mere three states and one territory still cling to the notion that cannabis is the forbidden fruit. Bravo to them for sticking to outdated scripts!
But hold your applause! Despite all this greenery, cannabis is dodging the limelight in multi-tenant retail properties like a high schooler avoids the gym. It’s all thanks to some rather restrictive “prohibited use restrictions.” Who knew the biggest hurdle would be more legal red tape than a government building? If it’s not the feds, it’s landlords clutching their pearls over what their properties could potentially host.
Prohibited Use Restrictions: A Comedy of Errors
Now, what exactly are “prohibited use restrictions”? Imagine a really picky bouncer outside a club who denies entry to anyone who doesn’t fit the dress code (which, newsflash, changes daily). These restrictions essentially ensure that tenants can’t turn a chic retail space into the local “hobby craft store” featuring “adult” products and odors reminiscent of a skunk. Originally, these were the landlords’ shields against chaotic property usage, making sure that the sacred retail space remains, well, ‘retail-y.’
Once upon a time, tenants were just as enamored with these restrictions as landlords were. Fast forward to the present day, and it’s a whole new ball game—landlords now want flexibility like they just discovered yoga while tenants sit nervously, worrying that non-retail tenants might scare customers away like a horror movie. It’s heartwarming, really. Who doesn’t love a good ol’ property identity crisis?
The Ultimate List of Party Poopers
Now let’s dive into the delightful world of prohibited use restrictions impacting our beloved cannabis businesses. Think of them as the “no fun allowed” signs on a playground. Here’s a brief comedy rundown:
- Noxious Use Restrictions: Anything that might smell bad, like your uncle’s leftovers from last Thanksgiving. This could mean anything from growing cannabis to that wonderful scent of fertilizer.
- Head Shop Restrictions: Basically, a landlord saying “No, thank you” to any establishment that dares sell a piece of glassware that could be mistaken for anything other than a decorative paperweight.
- Non-retail Restrictions: Stipulates that only a “real” store can exist—cue the eye-roll as it leaves no room for our beloved cannabis dispensaries except as long as they fly under a competitive, strictly regulated banner.
- High-Intensity Parking Restrictions: Because God forbid we allow too many people to park in one area. This often targets dispensaries, as though those curious shoppers might just show up for a quick chat about their favorite strain.
Best Practices: Or, How to Navigate This Minefield
For those brave souls looking to host cannabis in their multi-tenant retail space, it’s time to roll up your sleeves. Landlords and tenants need to sift through every contract, agreement, and fine print as if they’re searching for the last donut in the box. Remember to look at Reciprocal Easement Agreements (REAs) or Covenants, Conditions and Restrictions (CCRs) like they’re ancient scrolls with some serious secrets. If anything is amiss, consider it an opportunity for a riveting game of legal bingo.
Landlords should investigate REAs or CCRs like they’re looking for buried treasure before jumping into bed with a cannabis tenant. And tenants, don’t be shy—request those documents and act like a rebellious teenager challenging the rules. Want a clear path to peace? A legal amendment to erase those pesky restrictions should be your battle cry.
Let’s Join Forces (Or at Least Not Shoot Ourselves in the Foot)
As landlords search for the next cannabis star and hopeful cannabis enterprises eye retail chances, there is an undeniable truth—we’re all in this together, and let’s face it, it could quickly turn into a sitcom. If a pesky restriction stands in the way, an amicable “Let’s work it out” session is in order. Who knows? You might even emerge as the best of buds (pun intended).
Andrew Hodgson and Nida Shakir Ghaffar, real estate attorneys at Husch Blackwell LLP, are here to sprinkle their legal glitter on your retail dreams across all sectors, whether it’s retail, industrial, or commercial. After all, they specialize in finding a way through the maze of regulations faster than you can say, “Can I get that in writing?”
